No, as long as the company has 20 or more employees on the payroll. Under the Medicare secondary payer provisions, a company with 20 or more employees cannot discriminate against individuals because they are eligible or covered by Medicare. Employers that are subject to the Medicare law must provide the same group health plan coverage to workers and their dependents who have Medicare coverage as they provide to workers and their dependents who are not Medicare-covered.

An employee, spouse or other dependent who has Medicare coverage may reject the employer-sponsored plan and retain Medicare as primary coverage, but the employer plan then may not supplement Medicare and can only pay for benefits that are not covered by Medicare. For example, since Medicare Part D became available on January 1, 2006, an employer plan that is subject to Medicare may not supplement the Medicare prescription drug benefit.

The law also specifically prohibits employers, or other entities such as insurers, from offering a group health insurance plan or option that is designed to circumvent this provision in an attempt to induce covered individuals to reject the employer's general health benefit plan offered to other employees and their dependents. A civil money penalty of up to $5,000 may be assessed for each violation.

Source: Spencer’s Benefits Reports, Benefits Q&A, July 2009.