What is the HRA Medicare relationship? Can an HRA be used for Medicare Premium Reimbursement in 2024? Can employers pay Medicare premiums for employees? These are all good questions. Since Medicare is governed by several laws, this requires a complex answer. Here's what to know about HRAs and Medicare when employers are choosing to reimburse employees for health insurance.
Medicare Premium Reimbursement is a type of employee benefit that allows employers to help shoulder the costs of Medicare premiums for their employees. The relatively new way of doing this is through a tax-advantaged health reimbursement arrangement (HRA), where employers use pre-tax dollars to reimburse Medicare premiums and these funds, free from employer tax or income tax.
You bet! But they must go through the proper channels to do so without having to pay taxes on these funds. Technically, employers aren't paying for Medicare premiums as much as they are reimbursement their employees for expenses incurred. Health reimbursement arrangements are the vehicle through which employers can pay Medicare premiums for employees in the most optimized, tax-advantaged way.
There are two types of HRAs that allow employers to reimburse employees for Medicare premiums.
The first one is for small businesses (less than 50 employees) and has an annual reimbursement limit; it's called a Qualified Small Employer HRA. The newer iteration, called the individual coverage HRA (ICHRA), allows businesses of any size to reimburse for Medicare premiums (and other health insurance premiums and sometimes medical expenses). Luckily, both HRAs work similarly with Medicare, but if you want to dig in further, you can check out our ICHRA Medicare post or our QSEHRA Medicare post.
For employees to participate in an HRA and receive reimbursements, they must be covered by a health plan that meets their HRA participation requirements. Major medical plans qualify, as well as Medicare.
However, the integration of Medicare with HRAs is complex, since there are existing laws guarding Medicare that require a bit more clarity.
Here's the basic Medicare HRA 101 that you should keep in mind.
To qualify for an HRA like ICHRA or QSEHRA, 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.
When you're signing up for Medicare, there are two routes you can go. The first is "Medicare Advantage" - also called Part C. These are the newer arrangements that have all of the parts mushed together. You buy one Medicare Advantage plan and you're covered. They can be tied to an HMO or PPO network.
The second route is traditional Medicare. That's where you have A & B through the federal government and generally pair it with a drug plan (Part D) and a Supplement plan (aka "Medigap") to assist with some of the out-of-pocket medical expenses Parts A & B don't cover.
→ More on ICHRA and Medicare
Here's a quick refresher on what the different types of Medicare are:
Pro-tip: HRAs may be used to reimburse premiums for Medicare and Medicare supplemental health insurance (Medigap), as well as other medical care expenses.
If you're still trying to sort out Medicare HRA benefits or how Medicare premium reimbursement arrangements works, our team is here to help. Just chat with our team of HRA administrators in the bottom right hand corner of our screen. We'd be happy to help!
In the meantime, give our Health Reimbursement Arrangement Guide a read or see how our HRA administrator platform could work for you. We put it together just for you!
This post was originally published in 2020 and has been updated with new information and insights for 2023.