The Different Parts of Medicare
- Part A: "Hospital insurance" covers costs from hospitals for free and acts as "classic Medicare." It's considered a major medical insurance plan that everyone is required to have.
- Part B: "Medical insurance" that covers 80% of approved doctor visits and outpatient procedures after the annual deductible is met. It is also considered a major medical requirement.
- Part C: "Medicare Advantage," aka hospital and doctor coinsurance. The cost depends on the plan you select.
- Part D: "Prescription insurance" helps you pay for your prescriptions. Pricing depends on the plan you select and your income. This is not considered a major medical plan and is insufficient to meet the minimum essential coverage requirements.
When you're signing up for Medicare, there are two routes you can go:
The first is Medicare Advantage - these are the newer arrangements that combine all the parts. You buy one Medicare Advantage plan, and you're covered. They often have a $0 premium and are offered by traditional, commercial health insurance companies. They look and feel more like private health insurance plans that most people are used to, with specific provider networks and cost-sharing (deductibles, copays, and out-of-pocket maximums).
The second route is Medicare Supplements (also called "Medigap"). You still have "traditional Medicare" parts A & B through the Federal government, but you purchase a supplemental plan to limit your total out-of-pocket exposure.
How Medicare works with ICHRA plans:
- 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.
- The ICHRA may be used to reimburse premiums for Medicare and Medicare supplemental health insurance (Medigap), as well as other medical care expenses. (Premiums for Parts A, B, C, D, and Medigap policies are all eligible for reimbursement).
The employer generally has discretion to choose which medical expenses (premiums only or premiums and qualified medical expenses) are eligible for reimbursement under the terms of an ICHRA, as long as the employer offers the same benefits, on the same terms and conditions, to groups of employees in specified ICHRA classes subject to the exceptions under the same terms requirement in the final rules.
Required Documentation for Reimbursement:
To substantiate Medicare premiums for an ICHRA, participants must provide documentation or an attestation confirming enrollment in Medicare (Parts A and B or Part C). Participants can substantiate this by providing a third-party document, such as an insurance card, an explanation of benefits, or a document from the Social Security Administration. Alternatively, they can provide an attestation stating their Medicare enrollment, including the date of coverage and the name of the provider. Required documentation can include:
1. Third-Party Documentation
- Insurance Card
- Explanation of Benefits (EOB)
- Benefit Verification Letter from the Social Security Administration
- Document from the Exchange
2. Participant Attestation:
- Completed Attestation form confirming Medicare enrollment
3. Ongoing Substantiation
- Fully completed ICHRA claim form with supporting documentation such as a receipt of payment or itemized receipt from carrier listing the coverage month.
ICHRA and Medicate Secondary Payer (MSP)
The issue of Medicare Secondary Payer - specifically, which party pays for an individual's health expenses when they are eligible for Medicare - is an important consideration. Laws are in place to encourage group health plans to serve as the primary payer for Medicare recipients, shifting the financial burden on the Medicare system. For example, Medicare is the secondary payer to certain other health plans and coverage, including group plans. This includes group plans offered by employers that employ at least 20 people, group plans that cover individuals with End-Stage Renal Disease (ESRD) Medicare, and large group health plans (with 100 or more employees). The same holds for HRAs. Unless the employer qualifies for an exception to the Medicare Secondary Payer rule, the HRA would be treated as the primary coverage, and Medicare would not be utilized for reimbursements until the HRA funds were exhausted.
Employers can submit a CMS MSP Exemption form if they meet any of the following criteria:
- Individuals with Retiree Coverage: Former employees and their family members who participate in a group health plan are generally exempt from the MSP reporting requirements. This is because such former employees are not considered to have coverage by current employment status.
- Employers with Fewer Than 20 Employees: The MSP reporting requirements only apply to those group health plans that have 20 or more employees for each working day in at least 20 weeks in either the current or the preceding calendar year. If an employer has a workforce that is close to the threshold, this requires constant monitoring to ensure the employer does not exceed the threshold. For multi-employer or multiple-employer plans, if at least one of the employers in the plan has 20 or more employees, the group health plan will be subject to the MSP reporting requirements.
- HRA Coverage of Less Than $5,000 Annually: CMS has provided an MSP reporting requirement exemption for HRAs based on their annual benefit amount. HRA coverage does not have to be reported if its annual benefit is less than $5,000.