Medicare is already a complex topic, but when you combine Individual Coverage Health Reimbursements Arrangements (ICHRAs) with Medicare, it’s about as complex as it gets. That’s why we’d like to shed some light on how employers and employees can take advantage of ICHRA for their Medicare-eligible population.
Integrating ICHRAs with Medicare
ICHRAs are designed to reimburse employees for health insurance premiums and out-of-pocket medical costs, including Medicare premiums and Medicare health plan premiums. Integrating the two together is especially complex because existing laws guard Medicare, including the anti-duplication provision, the SSA’s equal benefits rule, and the Medicare Secondary Payer rule (MSP).
To understand how ICHRAs and Medicare can be integrated, it’s helpful to understand what ICHRAs integrate with Medicare parts. There are four parts of Medicare: Part A, Part B, Part C, and Part D.
- Part A: “Hospital insurance” provides inpatient/hospital coverage excluding long-term care and acts as “classic Medicare.”
- Part B: “Medical Insurance” provides coverage for approved doctor visits and outpatient procedures, including medically necessary and preventive services.
- Part C: This is referred to as Medicare Advantage, otherwise known as hospital or doctor coinsurance, and is provided by private insurers.
- Part D: “Prescription insurance” provides prescription drug coverage by private insurers.
ICHRA may be used to reimburse premiums for Medicare and Medicare supplemental health insurance (Medigap) and other medical care expenses. (Premiums for Parts A, B, C, D, and Medigap policies are eligible for reimbursement).
Qualifying for ICHRA plans and Reimbursements
Qualifying for Medicare doesn’t automatically ensure reimbursement participation in an ICHRA. Individuals need to be enrolled in either a Medicare Advantage or Medicare supplement plan to move forward. To qualify for an ICHRA, the employee eligible for Medicare must have coverage of Part A and Part B together, or Part C – Part B by itself doesn’t qualify as Minimum Essential Coverage.
Designing ICHRA with Medicare consideration
The employer may use discretion in choosing which medical expenses (premiums, cost-sharing, or qualified medical expenses) are eligible for reimbursement under the terms of an ICHRA. However, the employer must offer the same benefits, on the same terms and conditions, to groups of employees in specified ICHRA classes. In addition, the amounts provided to employees can be increased within each class based on either age or number of dependents.
The ICHRA classes are as follows:
- Full-time employees
- Part-time employees
- Seasonal employees
- Employees covered under a collective bargaining agreement
- Employees in a waiting period
- Foreign employees who work abroad
- Employees working in the same geographic location (same insurance rating area, state, or multi-state region)
- Salaried workers
- Non-Salaried workers (such as hourly workers)
- Temporary employees of staffing firms
- A combination of two or more of the above
ICHRA can pay for medical expenses for Medicare participants (if allowed by the plan), but medical expenses cannot be designed around what Medicare pays or does not pay. There is also another angle to consider when merging the benefits of Medicare and ICHRA plans. It’s illegal for any employer to incentivize a staff member to move off the group health plan and onto Medicare. Therefore, it’s important the employer fully understands the qualifications, regulations, and submission process so employees are eligible for Medicare and ICHRAs are set up properly.
Special consideration for Medicare-eligible employees when transitioning from a group plan to an ICHRA
For those switching from a group plan to an ICHRA, Medicare-eligible employees likely will only be enrolled in Part A initially. Disenrolling from their group plan qualifies them to register for Part B through a Special Election Period (SEP) with no penalty. They’ll need both proofs of coverage for A+ B to participate in their ICHRA for Part C or Medicare Supplement.
How and where to find support?
It’s no secret that Medicare Advantage and Medicare Supplement plans provide enhanced coverage compared to group health plans. Therefore, implementing an ICHRA for your Medicare-eligible population provides compliant access to a superior benefit at an overall lower cost to eligible employees and your organization. If you need assistance with transitioning employees interested in Medicare or have questions about how to manage ICHRA options combined with Medicare, we can help. We have expertise in providing Medicare education and enrollment services to your employees and are informed of the latest ICHRA guidelines. For more information about how we work with employers and HR professionals, visit us at medicarechoicegroup.com/employers.