Do you have employees covered under Medicare? You can reimburse those employees under the Affordable Care Act, as long as certain requirements are met.
The Affordable Care Act requires Applicable Large Employers (any Company that has an average of at least 50 full-time equivalent employees) to offer their employees coverage under a group health plan subject to market reforms. Included in the market reforms is a prohibition on annual limits for essential health benefits and a requirement to provide certain preventive care without cost sharing. Outlined in IRS Notice 2013-54, an employer must offer a group health plan with minimum essential coverage. The employer cannot offer a plan that only covers excepted benefits to integrate with an individual health plan policy, and then reimburse the individual for their policy. Excepted benefits are not subject to requirements of the ACA, and include dental, vision, long-term care, Medicare, and health-flex plans.
On April 6, 2015, the IRS then issued Notice 2015-17, further clarifying the application of Code Section 4980D to Certain Types of Health Coverage Reimbursement Arrangements. This latest IRS Notice 2015-17 specifically addresses the question regarding employers that have employees covered under Medicare. Keep in mind, Medicare Part A is the Hospital plan, Medicare Part B is the Medical plan and Medicare Part D is the prescription plan.
As outlined in IRS Notice 2015-17, an employer payment plan will not be subject to excise penalties by reimbursing employees for Medicare Part B or Part D premiums if the following four criteria are met:
- The employer offers a group health plan (other than the employer payment plan) to the employees that does not consist solely of excepted benefits and offers coverage providing minimum value.
- The employee participating in the employer payment plan is actually enrolled in Medicare Parts A and B.
- The employer payment plan is available only to employees who are enrolled in Medicare Part A and Part B or Part D.
- The employer payment plan is limited to reimbursement of Medicare Part B or Part D premiums and excepted benefits which include Medigap premiums.
As employees delay retirement, more companies may find themselves in this situation. It does not exempt the applicable large employer from offering a group health plan meeting the minimum essential coverage, but does allow flexibility for those employees as they become eligible for Medicare. Please contact us if you have further questions.