Group Medicare for employers or unions?
The Medicare Secondary Payer (MSP) is a provision that protects the Medicare Trust Funds from paying for services when another party, in fact, is responsible for payment. The rules within the provision prohibit employers from incentivizing or pressuring an employee to enroll in Medicare. Although an employee may voluntarily opt-out of employer-sponsored health coverage and enroll in Medicare, the employer may not induce or otherwise purposefully encourage such a decision.
A compliant alternative, however, can be found in Health Reimbursement Arrangements (HRAs). An HRA is a tax-advantaged plan that allows employers to reimburse employees for qualified medical expenses. An HRA must be funded solely by an employer and be treated as a group health plan, subject to the MSP provision. The employer determines which benefits to include upon creation of the arrangement. Such benefits may include reimbursement for Part B, D and Medicare supplement premiums.
Although there are six different HRA structures available, there are two that are relevant to Medicare: QSEHRA or ICHRA Employers with less than 50 full-time employees can offer this HRA to their employees to get qualifying medical expenses and insurance premiums reimbursed.
All full-time employees are automatically eligible for the QSEHRA no matter their insurance status, however, if they have an insurance plan that qualifies as MEC, then all of their QSEHRA reimbursements will be 100% tax-free. A QSEHRA is a great fit for a small business ready to offer their first health benefit or frustrated by annual cost increases and limited employee flexibility with their group plan.
Available to organizations of all sizes, an ICHRA is a great choice for employers who want a customizable benefit to offer employees in different classes different benefits. Keep in mind that with an ICHRA, you cannot offer employees in the same class a choice between group coverage and an ICHRA. For employers with employees in many states, an ICHRA is often a great solution.
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Individual Coverage HRA (ICHRA)
These HRAs enable employers to fund employees’ individual health coverage rather than providing group health insurance. this is for employers of any size to reimburse employees’ qualifying medical expenses, like premiums for individual coverage or Medicare on a tax-free basis.
Qualified Small Employer HRA (QSEHRA)
This HRA lets employers provide tax-free funds to employees to cover eligible expenses, but the employer must employ fewer than 50 people and meet other criteria. It is for small employers to reimburse employees’ qualifying medical expenses, like premiums for individual coverage or other expenses on a tax-free basis.