Staying compliant with ICHRA and Medicare
Individual Coverage Health Reimbursement Accounts (ICHRA) are a great tool to help control budgeting healthcare costs and your employees, but what happens when your employee is eligible for Medicare?
When adopting the ICHRA benefit structure into your group health benefits, you will find that they are generally subject to the same laws adopted by group health plans. ICHRAs, like other employee benefits, must follow ERISA. They must also provide a process for the following:
- Definition of plan design and employee eligibility (EMPLOYER)
- Establishment of the contribution allowance (EMPLOYER)
- Selection and purchase of individual health insurance coverage (EMPLOYEE)
- Submission of premiums for reimbursement (EMPLOYEE)
- Approval and reimbursement of claims/premiums (EMPLOYER)
Medicare Enrollment and ICHRA
When your employee is eligible for Medicare, they will then transition from their open market plan and enroll in Medicare Part A and Medicare Part B under an ICHRA. (Medicare enrollment must be completed in their Initial Enrollment Period to avoid penalties.) There are unique requirements that are important to understand as the employer:
- To qualify for ICHRA reimbursements, they must have Medicare Part A and Medicare Part B together. (Medicare Part B alone does not qualify for Minimum Essential Coverage.)
- ICHRA funds can be used to reimburse for any of the following premiums:
- Medicare Part A (if applicable)
- Medicare Part B
- Medicare Part C (Medicare Advantage Plan)
- Medicare Part D
- Medigap (true supplement)
Once your employee has provided you with proof of their benefits, (this could be their Medicare bill, private insurance premium, or Social Security statement showing premium reduced from benefits) simply upload their information. Depending on the classification and structure of your company ICHRA, you may find that Medicare premiums are lower in cost than the coverage they had purchased on the open market before the age of 65. Great news for you, the employer, is that any monies not spent stay retained with the company.
Example:
You provide “classification one” (full-time single employee) $500 a month to lower their healthcare costs. Medicare Part A and Medicare B combined are typically under $200 (2023). Now depending on the private insurance option that your employee may select, you could see up to $300 a month in savings.
If you want to change the ICHRA benefit amount that your Medicare employees receive, be sure the application of the ICHRA is even within the class to avoid any discrimination. Changing the allowance mid-year can have a larger impact on your employees who opted out due to being eligible for ACA credits and recommended changing at the new calendar year.
Classifications with ICHRA
ICHRAs can have up to eleven different classifications, and you can choose to have a larger reimbursement amount for older employees or employees that have dependents at each classification. Be sure that you are applying the ICHRA amount evenly within each class to avoid any discrimination.
Example:
In “classification one”, (your full-time employee) single can receive up to $300 a month in benefits. Your full-time employee with two dependents is eligible for $500 a month. Your Medicare-eligible (single) employee could be eligible for up to $900. When calculating age and benefit amount, ICHRA cannot exceed a 1:3 ratio utilizing your youngest employee (1) to your oldest employee (3).
Are you new to ICHRA and looking for more resources to support you and the team? Contact Schatz Benefit Group to learn more about how ICHRA can impact your group health benefits.