Employer Insurance And Medicare Part B
Like Medicare Part A, you will be eligible for Medicare Part B when you turn 65. There is a monthly premium for Part B, and you have the option to opt out of receiving Part B coverage if you are still receiving health benefits from your employer, so long as you are still working there.
In most cases, you can delay your Part B coverage and continue to receive your group coverage until you eventually retire without a penalty. When you do leave your job, you should qualify for a special enrollment period. At this point, you will have eight months to sign up for Medicare Part B without having to pay a late penalty in the form of a higher premium.
Some employers have different policies regarding how insurance works for employees over 65. Even if you can keep your group coverage, the policy may start to work differently after you qualify for Medicare. If you are considering staying on your group coverage, talk to your human resources department or benefits manager and ask how the policy will work for you after 65.
Medicare Premium Reimbursement Arrangements Are Allowed For Some Employers
In short, the government is saying that an employer cannot simply pay Medicare premiums for its active employees. However, if the employer offers group health insurance and Medicare-eligible employees are given the option to sign up for that group health coverage, the employees can choose to waive the group health coverage and the employer can reimburse the employees for Medicare Part B, Medicare Part D, and Medicare Supplement Insurance premiums.
This is huge. As long as a company does not force or pressure employees to drop the group health coverage and instead, sign up for Medicare, it can incentivize Medicare-eligible employees to choose this option by paying some or all of the premiums. This can be a win-win: the employer may see the group premiums decrease as older workers drop off the plan, and Medicare-eligible employees may save money and, in many cases, get better coverage.
However, the IRS does issue a word of caution, and its a big one:
Note that to the extent such an arrangement is available to active employees, it may be subject to restrictions under other laws such as the Medicare Secondary Payer provisions.
Medicare Part B Premiums
For Part B coverage, youll pay a premium each year. Most people will pay the standard premium amount. In 2022, the standard premium is $170.10. However, if you make more than the preset income limits, youll pay more for your premium.
The added premium amount is known as an income-related monthly adjustment amount . The Social Security Administration determines your IRMAA based on the gross income on your tax return. Medicare uses your tax return from 2 years ago.
For example, when you apply for Medicare coverage for 2022, the IRS will provide Medicare with your income from your 2020 tax return. You may pay more depending on your income.
In 2022, higher premium amounts start when individuals make more than $91,000 per year, and it goes up from there. Youll receive an IRMAA letter in the mail from SSA if it is determined you need to pay a higher premium.
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How Can I Get A Reimbursement Arrangement With A Small Employer
Organizations with fewer than 50 employees and no group coverage can still offer the Qualified Small Employer Health Reimbursement Account to those enrolled in Part A. You must meet the minimum coverage standard to qualify for the reimbursement.
Part A premiums are free for most people and the cost wont qualify for reimbursement if you do have to pay.
The Answer Isit Depends
We already know that a retiree-only HRA is allowed. Per IRS guidance in 2013, a retiree-only HRA is considered a group of one and therefore is not subject to the rules applicable to group health plans under the Affordable Care Act. In other words, it would be allowed even if QSEHRAs were not. Still, that does not answer our question about reimbursing active employees for Medicare premiums.
This topic is discussed in IRS Notice 2015-17, which was issued February 18, 2015. Below is the wording from the notice, followed by an explanation of what it means.
An arrangement under which an employer reimburses some or all of Medicare Part B or Part D premiums for employees constitutes an employer payment plan, as described in Notice 2013-54, and if such an arrangement covers two or more active employees, is a group health plan subject to the market reforms. An employer payment plan may not be integrated with Medicare coverage to satisfy the market reforms because Medicare coverage is not a group health plan.
However, an employer payment plan that pays for or reimburses Medicare Part B or Part D premiums is integrated with another group health plan offered by the employer for purposes of the annual dollar limit prohibition and the preventive services requirements if
the employer offers a group health plan to the employee that does not consist solely of excepted benefits and offers coverage providing minimum value
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Ichra And Medicare: What You Need To Know
Medicare is already a complex topic, but when you combine Individual Coverage Health Reimbursements Arrangements with Medicare, its about as complex as it gets. Thats why wed 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 SSAs equal benefits rule, and the Medicare Secondary Payer rule .
To understand how ICHRAs and Medicare can be integrated, its 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.
Qualifying for ICHRA plans and Reimbursements
Designing ICHRA with Medicare consideration
The Medicare Secondary Payer Provision
There is one last thing to know before we finally answer the question posed in the title of this article: Medicare Secondary Payer.
Medicare Secondary Payer is the term used when Medicare does not pay as primary insurance. According to CMS.gov, for working individuals aged 65 or older, Medicare pays as secondary in two instances, according to CMS.gov.
- If the member is 65 or older, covered under a group health plan in which either the member or the member’s spouse is actively employed, and that employer is a multi-employer group with at least 20 individuals
- If the member is 65 or older, is self-employed, and covered under a group health plan in which either the member or the member’s spouse is actively employed and that employer has at least 20 employees or at least one is a multi-employer group with 20 or more individuals
If it pays as secondary insurance, Medicare coordinates benefits with the primary insurance company.
If your eyes didn’t gloss over while reading the last two sections, kudos to you. Let’s break that information down for the rest of us!
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Can Employers Pay Medicare Premiums For Active Employees
Its a good question. Because of the Affordable Care Act , age is a huge rating factor for small-business employers, with health insurance carriers charging up to three times as much for older workers as they do for younger employees. While larger and self-insured companies are not subject to the ACAs modified adjusted community rating rules, age is a big rating factor for them as well.
So whats the answer? Can an employer pay for Medicare Part B and D, Medicare Advantage, and/or Medicare Supplement Insurance premiums for their employees, and either require or encourage them to drop off the group health plan? If so, it might be a good strategy for companies who have seen their premiums skyrocket in recent years, and it could be a great way for brokers to save their clients some money.
Secondary And Primary Insurers
The payment structure is one factor that can help you decide whether it is worth it to continue to receive employee group coverage. After age 65, your group insurance can either become your primary or secondary insurer. Whichever it becomes can be based on your companys size or other factors.
If your group plan remains your primary insurer, your existing coverage will continue to pay for its benefits, as it would normally. If your employer has coverage that is primary, you generally do not need to sign up for Medicare Part B . You may still want the extra coverage from Medicare, so it is best to look into exactly what benefits you could be getting from both insurances before you make a decision.
If your group plan becomes your secondary insurer, it pays second. The secondary plan covers all or some of the health care expenses that the primary insurer has not paid. For example, a secondary insurer could pay the 20 percent coinsurance on a service covered by Original Medicare. If you have secondary insurance and do not have primary insurance, you risk having very little coverage for necessary medical services.
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Set Up Online Bill Payment With Your Bank
Set up your one-time or recurring payment correctly with your bank. Enter your information carefully, to make sure your payment goes through on time.
Give the bank this information:
- Your 11-character Medicare Number: Enter the numbers and letters with NO DASHES, spaces, or extra characters. Where to find your Medicare NumberThe letters B, I, L, O, S, and Z arent used in Medicare Numbers. If you see a 0 in your Medicare Number, enter it as a zero, not the letter O.
- Payee name: CMS Medicare Insurance
- Payee address:St. Louis, MO 63179-0355
- The amount of your payment
The bank might mail a paper check even if youve set up an online payment. Why would the bank mail my payment?
Generally, online payments process in 5 business days. If your bank mails a check, it may take longer. Your bank statement will show a payment made to CMS Medicare.
Pay the correct amount
If you want to have automatic payments set up that will update if your premium changes, sign up for Medicare Easy Pay. Get details about Easy Pay.
Help For Employees And Employers
Employees often have questions regarding Medicare and how their enrollment can affect the choices they make when electing employer-sponsored coverage. Employees with questions regarding Medicare should be directed to their local State Health Insurance Assistance Program or SHIP. This program, available in all 50 states, provides free and unbiased information to employees regarding Medicare including enrollment options, utilization concerns and help with claim questions. Each state has its own program, run through the state Area Agency on Aging.
For employers, a benefits adviser can be a great partner for any employer who needs guidance on how to resolve concerns surrounding their employees who are currently or will become eligible for Medicare. Employers can also get help via the Employee Benefits Security Administration or EBSA, which can answer employer questions concerning laws and regulations surrounding benefits. This site is run by the Department of Labor and includes myriad resources for employers of every size.
To learn more and get access to a benefits adviser, .
This communication is for informational purposes only it is not legal, tax or accounting advice and is not an offer to sell, buy or procure insurance.
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How Does A Tax
With a formal, tax-free HRA, employers commit to a fixed allowance amount they will use to reimburse employees for their health insurance premiums and potentially other qualified medical expenses referenced in IRS Publication 502. Unlike a stipend, employers dont pay anything until an employee submits proof of the incurred medical expenses with a receipt or invoice. Any unused allowance at the end of the plan year stays with the employer.
With an HRA, employees purchase their own coverage via the federal Marketplace or their state exchange. The employer reimburses employees monthly, up to their allowance amount, typically through their paycheck on a pre-tax basis.
If you have many employees on Medicare, then youre in luck. HRAs can be a medical reimbursement tool for Medicare premiums, but there are conditions for each type of HRA, so be sure to read the regulations carefully.
With an HRA administration software provider like PeopleKeep, the following HRAs can help you offer a formal health benefit to support your employees healthcare needs in just minutes every month.
What Your Employer Cannot Do
When it comes to keeping health insurance from your employer after age 65, you have rights. Rules regarding health insurance past 65 arent always black and white, but the list below are some examples of actions your employer cannot do once you become eligible for Medicare.
- Your employer cannot require you to get on Medicare once you turn 65.
- Your employer cannot require you to get on a different kind of insurance .
- Your employer cannot offer you a different kind of insurance than people younger than you.
Note: The law that mandates the rules above only applies to businesses with more than 20 people. If you work for a business with less than 20 people, your employer may require you to enroll in Medicare Part B at age 65. Talk to your employer to learn more about your options.
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So Tell Me Are Medicare Premiums Tax Deductible
Medicare and taxes have more in common than you think. In addition to being complex and confusing at times, both can yield deductions that provide some relief to your wallet. This knowledge leads us to a common question: are Medicare premiums tax deductible?
Well, the short answer is yes. However, with that yes, a few conditions apply.
What, exactly, may those conditions be? Keep reading to learn more about how your Medicare premiums may be able to save you some money when tax time rolls around.
Medicare Eligibility A Quick Review
In general, eligibility for Medicare starts on the first day of the month in which an employee turns 65, as long as that employee has worked in the United States for at least 10 years, contributing through a payroll tax deduction, to the Medicare program. While there are other avenues for eligibility such as certain serious illnesses and disability, for the purpose of this blog we will only focus on standard eligibility based on age.
Once an employee becomes eligible for Medicare, they must make decisions regarding how and when to enroll. These decisions can affect employer decisions regarding employer-sponsored coverage.
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How Does Employer Health Insurance Work With Medicare
The size of your employer will determine how your Medicare benefits will coordinate with your employer coverage. If youre aging into Medicare while working for an employer with over 20 employees, your group plan is primary and Medicare secondary.
In this scenario, most beneficiaries choose to sign up for Part A, since its premium-free for those who have paid in for sufficient quarters. If youre currently collecting Social Security Income, youll automatically be enrolled in Part A. You cant collect SSI without registering in Part A.
If you require care at a hospital, your Part A benefits will keep your costs lower. For example, if your employers group insurance has a $4,000 hospital deductible, it makes sense to enroll in Part A for a lower deductible.
For your outpatient and medication insurance, a plan from an employer with over 20 employees is creditable coverage. This safeguards you from having to pay late enrollment penalties for Part B and Part D, respectively.
Can An Employer Encourage An Employee To Enroll In Medicare
Regulations under Medicare, found under the Medicare Secondary Payer
rules specifically prohibit employers to provide any incentive that would encourage an employee to enroll in Medicare. In addition, neither an employer nor an insurance carrier can take into account an employees Medicare status based on their age or disability. Employers are prohibited from denying or terminating employer-sponsored coverage simply on the assumption that an employee has or can enroll in Medicare. Employers cannot impose limitations to those who are entitled to Medicare by providing less comprehensive coverage, by excluding certain benefits, reducing benefits, imposing higher deductibles or co-insurance or by charging more for the coverage provided. Employers cannot provide misleading information or any information that would encourage an employee to waive employer-sponsored coverage. As with all other rules regarding benefit enrollment similarly situated employees must be offered equivalent benefits and benefit election opportunities. Medicare-eligible employees are not considered a separate class of employee and therefore must be included in that similarly situated group based solely on their employment status.
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Excepted Benefit Health Reimbursement Arrangements
EBHRAs may be offered by employers of any size. Reimbursements are limited to short-term medical premiums, COBRA premiums and premiums for excepted benefits, such as dental and vision plans.
Other restrictions may apply to the above arrangements so its always best to consult with a benefits expert.
