If you currently have fewer than 20 employees, did you know that you can reimburse Medicare for those employees who are already covered by Medicare?
The ACA or Affordable Care Act’s $100-a-day penalty for improper medical reimbursements might get you worried. However, it is good to know that you can reimburse Medicare without the penalty when you have fewer than 20 employees.
How Does it Work?
You should know that some group insurance plans do not cover Medicare-eligible employees if the group plan covers fewer than 20 employees. Take note that:
- Medicare becomes the primary payer, and the insurance company is secondary if there are fewer than 20 employees.
- The insurance company is the primary payer, and Medicare is secondary if there are more than 20 employees.
This means that if you are an employer with fewer than 20 employees, the Medicare secondary payer rules come into play. These rules do not require you to offer group health insurance to your Medicare-eligible employees. With this Medicare rule, the IRS allows you to reimburse Medicare without the $100-a-day penalty.
If you happen to offer group insurance coverage to your less than 20 employees and one or more them are Medicare-eligible, you may use a health reimbursement account (HRA) or other account-based plans to reimburse Medicare parts B and/or D and Medigap insurance. Just make sure to meet the following requirements:
- You offer a group health plan to employees who are not eligible for Medicare.
- The employee receiving the HRA or other account-based Medicare reimbursement plan is actually enrolled in Medicare part B or D.10
- You make the HRA or other account-based Medicare reimbursement plan available only to employees who are enrolled in Medicare part B or D.
- You permit the Medicare employee to permanently opt-out of and waive future reimbursements from the HRA or other account-based plans at least annually and upon the termination of employment.
If you are an employer with fewer than 20 employees, you should not worry about the $100-a-day penalty. All you have to do is:
- make sure to offer a group health plan to employees who are not eligible for Medicare and
- offer the Medicare reimbursement HRA to those who are eligible for Medicare.