Are HRAs subject to Medicare Secondary Payer (MSP) requirements?

The number of Americans enrolled in Medicare, largely the disabled and the elderly, is growing steadily as the population continues to age. In fact, the Centers for Medicare & Medicaid Services (CMS) projects that as the baby boom generation continues to transition from private health insurance into Medicare, 75 million Americans will be enrolled in Medicare by 2028.

However, despite the large number of Americans using this insurance option, the Kaiser Family Foundation finds that only one in five of Medicare beneficiaries rely solely on their Medicare plan for all of their health coverage. The majority have other supplemental coverage, such as a health reimbursement arrangement (HRA).

As an employer, there are unique rules you need to follow in order to coordinate coverage like Medicare and HRAs, such as the Medicare Secondary Payer reporting requirements. If you have employees that are on Medicare and are participating in an HRA, read on for the information you need to ensure you’re meeting reporting requirements.

What is Medicare Secondary Payer (MSP)?

Back when Medicare was created in 1966, it was used as a primary insurance option for many Americans—that meant Medicare was the primary payer for all of its beneficiaries’ insurance claims.

However, by 1980, the U.S. Congress passed legislation that made Medicare the secondary payer to certain primary plans as a way to shift costs from Medicare to other insurance carriers and private sources of payment.

This legislation created the MSP reporting requirements to protect Medicare Trust Funds and ensure that Medicare doesn’t pay for items and services that certain health insurance or other coverage is primarily responsible for paying.

While Medicare can be the primary payer for beneficiaries who don’t have any other kind of health coverage, the MSP rules apply to situations when Medicare isn’t the beneficiary’s primary health insurance coverage.

Do MSP reporting requirements apply to HRAs?

The MSP reporting requirements are designed to help CMS determine whether a plan is primary to Medicare, or in other words, if a health plan pays first and Medicare is the secondary payer.

These rules apply to all “group health plans,” as defined by the MSP statute. All HRAs, including the qualified small employer HRA (QSEHRA), the individual coverage HRA (ICHRA), and the group coverage HRA (GCHRA) are considered group health plans, and are therefore subject to MSP reporting requirements.

Learn more about how to combine Medicare and HRA benefits

Are there any exceptions to the MSP reporting requirements?

If you’re an employer that offers an HRA to an employee that’s enrolled in Medicare, you might still be off the hook when it comes to MSP reporting requirements. There are a couple of exceptions when it comes to which organizations are subject to MSP based on their size and the HRA allowance amount they offer.

Organizations with less than 20 employees

Medicare is automatically considered the primary payer for organizations with less than 20 employees. So if you’re a small employer offering a QSEHRA to only a handful of employees, you wouldn’t need to be included for MSP reporting.

This means that for your employees who are enrolled in Medicare, their claims would first be covered through their Medicare plan, and then through their QSEHRA as a secondary payer.

HRAs with less than $5,000 of annual coverage

Your organization is also exempt from MSP reporting requirements if the HRA annual allowance amount is less than $5,000 a person.

For example, let’s say you have an employee that’s enrolled in Medicare that also participates in your ICHRA benefit. As long as their monthly allowance is less than $416 (roughly $5,000 a year) then you don’t need to worry about MSP reporting.

What do employers have to do under MSP rules?

As an employer that’s subject to MSP reporting requirements, you’re simply responsible for completing an MSP input file in order to stay compliant.

In the MSP input file, you’ll report the information about your HRA coverage and your employees that are enrolled in Medicare to help identify whether your health plan is, or has been, a primary plan to Medicare.

Here’s what you’ll report on your MSP input file:

• Names of employees to whom the MSP requirement applies
• Social security numbers of employees to whom the MSP requirement applies
• Information about your health coverage
• Insurance type
• Effective dates
• Policy number

In addition to the above, you’ll also need to ensure that your plan provides for proper primary payments, as well as ensure that your plan doesn’t discriminate against disabled employees or employees and their spouses who are 65 or over.

Conclusion

HRAs are a great way for your employees enrolled in Medicare to get the supplemental coverage they need to pay for their health needs and other medical expenses. By following these simple guidelines, you’ll be able to confidently coordinate the two benefits for your employees while also staying compliant.