On June 21, 2022, the U.S. Supreme Court ruled, in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc., that a group health plan limiting outpatient kidney dialysis treatment to out-of-network benefits did not violate the Medicare Secondary Payer (MSP) rules.
As a reminder, the MSP rules prohibit an employer (with 20 or more employees) from taking into account an employee’s (or spouse’s) eligibility for Medicare. They must be treated in terms of group health plan benefits and eligibility the same as any other eligible participant. The plan cannot incentivize or force an eligible employee to decline the group health plan in favor of making Medicare primary. Regarding end-stage renal disease (ESRD), a plan cannot impose higher premiums or fewer benefits for those participants with ESRD. The ESRD rules apply to employers of all sizes and only for the first 30 months of the individual’s ESRD-based Medicare eligibility.
In this case, kidney dialysis treatment provider DaVita sued the self-insured group health plan sponsored by Marietta Memorial Hospital. DaVita argued that by limiting dialysis services to out-of-network benefits, the plan was providing disparate treatment to ESRD patients. After two lower courts issued conflicting opinions, the Supreme Court reviewed and ruled that such practice is not a violation of MSP rules. The Court acknowledged that dialysis treatment serves primarily those with ESRD; however, the limitation applies regardless of whether the participant has ESRD. Thus, the limitation is not targeted at those with ESRD and applies equally to those who do not.
The MSP rules can be complicated and costly for employers who violate them with group health plan designs. While this case has confirmed that the specific practice of limiting dialysis treatment to out-of-network benefits is permissible, any other plan designs based on Medicare eligibility should be closely reviewed with outside legal counsel.
Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc. »
PPI Benefit Solutions does not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.
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