With Americans now working longer, it is pretty common for employers to keep workers on the payroll past traditional retirement age. This can create a scenario in which Medicare eligible employees are also eligible for employer-sponsored health insurance. Along with enrolling such employees in employer plans, can the employer reimburse for Medicare payments?
In most cases, no. Medicare and private health insurance are considered two distinct entities that Washington likes to keep separate. However, there are exceptions to the rule. If a situation meets three specific criteria, an employer can reimburse for Medicare payments.
The Basics of Medicare
Medicare is a public health insurance plan intended for retirees. Most people sign up for it at the same time they sign up to begin receiving Social Security benefits. Medicare has four parts: Parts A, B, C, and D. Here’s what you need to know about each of them:
- Part A – This is the Medicare equivalent of major medical. It covers hospital stays, surgeries, etc. The vast majority of Medicare subscribers do not pay a monthly Part A premium.
- Part B – This is the Medicare equivalent of standard health insurance. It covers routine doctor visits, lab tests, etc. Medicare subscribers pay a monthly premium as well as an annual deductible.
- Part C – This is a private alternative to Parts A and B. Medicare eligible subscribers may choose Part C because it offers better coverage. It also comes with monthly premiums.
- Part D – This is Medicare’s prescription drug program. It comes with a monthly premium and can be obtained alongside Parts A and B or included in a Part C plan.
Medicare Part A is the only Medicare coverage that does not come with a monthly premium for most subscribers. As long as a subscriber has a history of at least 40 quarters paying into the Medicare system, no monthly premium is required. Subscribers still have a deductible and are subject to co-pays for most services.
The remaining three parts all have monthly premiums attached to them. This is where employers may want to help out. They may decide that reimbursing for Medicare premiums is better for both them and their employees, even while enrolling said employees in the company health plan. The government doesn’t see it that way.
Medicare Reimbursement Rules
Employers with group health insurance plans in place normally cannot reimburse Medicare-eligible employees for their monthly Medicare premiums. But according to BenefitMall.com, there are exceptions. Medicare premiums can be reimbursed when the following three conditions apply:
- The employer has fewer than 20 employees.
- The employer’s health plan is a secondary payer to Medicare.
- The reimbursement arrangement satisfies ACA requirements.
The vast majority of employers who retain Medicare eligible employees do not meet all three conditions. Therefore, most cannot reimburse for Medicare premiums. They can still enroll Medicare eligible employees in their own group health insurance plans if they choose to. Most do.
It’s a Complicated System
If all of this seems too complicated for you, you’re in good company. Whether by design or not, the health insurance system in this country is extremely complex. It is difficult for most people to understand, even in its most basic form. That goes for both Medicare/Medicaid and private health insurance.
As for employers wanting to reimburse for Medicare premiums, they should check with their accountants to determine if it’s allowed by law. Employers can also contact CMS directly. Employers should be aware that reimbursing premiums without meeting each of the three requirements is a violation of the law. It could mean serious headaches that companies generally like to avoid.