Medicare is a valuable insurance option for U.S. citizens over the age of 65 and young people with disabilities. According to the Kaiser Family Foundation, 62 million Americans were covered under Medicare in 2020 and enrollment is rising steadily.
The health reimbursement arrangement (HRA) is another health benefit that can also help the elderly and disabled get their medical expenses covered—and the good news is, HRAs and Medicare can be used together.
Combining Medicare and HRA benefits can get a little tricky, though, so let’s break down how it all works based on each HRA type and Medicare plan.
What types of Medicare are available?
Before we talk about how combining Medicare and HRA benefits works, let’s go over each type of Medicare plan in more detail.
Medicare Part A
Medicare Part A is hospital insurance, and is considered minimum essential coverage (MEC) by the Affordable Care Act.
Medicare Part A covers the following expenses:
- Inpatient hospital care
- Skilled nursing facility care
- Home healthcare
- Hospice care
Medicare Part B
Medicare Part B is medical insurance, and it is not considered MEC unless you also have Part A coverage.
Medicare Part B covers the following expenses:
- Provider services
- Home health services
- Ambulance services
- Preventive services
- Therapy services
- Mental health services
- X-rays and lab tests
- Chiropractic care
- Select prescription drugs
Medicare Part C
Medicare Part C, also known as Medicare Advantage, is a health plan offered through a private insurance company that has a contract with Medicare. Medicare Advantage is considered MEC, and often includes benefits beyond Medicare Parts A and B.
The most common types of Medicare Advantage plans are:
- Health maintenance organizations (HMOs)
- Preferred provider organizations (PPOs)
- Private fee-for-service (PFFS)
See more about these plans in our article, “Four common types of health insurance plans”
Medicare Part D
Medicare Part D is prescription drug coverage. Each Part D plan will have its own list of prescriptions that it covers, so be sure and check that the ones you need are on it before enrolling.
All Part D plans must cover all drugs available in the following categories:
- HIV/AIDS treatments
- Antidepressants
- Antipsychotic medications
- Anticonvulsive treatments for seizure disorders
- Immunosuppressant drugs
- Anticancer drugs (unless covered by Part B)
- Vaccines (unless covered by Part B)
How does Medicare work with the QSEHRA?
Let’s start with the qualified small employer HRA (QSEHRA). Employers with less than 50 full-time employees can offer this HRA to their employees to get qualifying medical expenses and insurance premiums reimbursed.
All full-time employees are automatically eligible for the QSEHRA no matter their insurance status, however, if they have an insurance plan that qualifies as MEC, then all of their QSEHRA reimbursements will be 100% tax-free.
The following table shows which Medicare plans can be combined and reimbursed with the QSEHRA, and under what conditions:
|
Medicare Part A |
Medicare Part B |
Medicare Part C |
Medicare Part D |
|
|
QSEHRA Qualified? |
Yes - if enrolled voluntarily* |
Yes - if combined with Part A** |
Yes |
Yes |
*If you’re enrolled automatically in Medicare Part A through social security, then the Internal Revenue Code (IRC) doesn’t consider the payroll tax paid for Medicare Part A to be a medical expense, so you can’t be reimbursed for this expense through the QSEHRA.
**Part A can work on its own, but not Part B—if you have Part B, you must also have Part A to meet MEC requirements.
How does Medicare work with the ICHRA?
Next, there’s the individual coverage HRA (ICHRA). Under the ICHRA, employees and their dependents must have a qualifying type of individual coverage in order to participate.
The following table shows which Medicare plans can be combined and reimbursed with the ICHRA, and under what conditions:
|
Medicare Part A |
Medicare Part B |
Medicare Part C |
Medicare Part D |
|
|
ICHRA Qualified? |
Yes - if enrolled voluntarily* |
Yes - if combined with Part A** |
Yes |
No - while not considered MEC, you can get your Part D premiums reimbursed through the ICHRA |
*If you’re enrolled automatically in Medicare Part A through social security, then the Internal Revenue Code (IRC) doesn’t consider the payroll tax paid for Medicare Part A to be a medical expense, so you can’t be reimbursed for this expense through the ICHRA.
**Part A can work on its own, but not Part B—if you have Part B, you must also have Part A to meet MEC requirements.
Read more about what insurance types with work the ICHRA
How does Medicare work with the GCHRA?
Lastly, let’s cover the group coverage HRA (GCHRA). This one’s quick—the GCHRA is the only HRA type that does not work with any Medicare insurance plans. Since Medicare is an individual insurance option, and the GCHRA must be offered with a group health policy, the two aren’t compatible.
Luckily, if your employer is offering a GCHRA, that means they’re also offering a group health policy that will cover many of the same healthcare needs you would get covered through Medicare. Any qualifying medical expenses that aren’t covered through your group health plan you’ll be able to get reimbursed through the GCHRA.
Conclusion
If you’re planning on using a Medicare plan, the QSEHRA or ICHRA are your go-to HRAs to work with your insurance coverage. You’ll be able to get your insurance premiums reimbursed as well as qualifying medical expenses to lower your out of pocket costs down even further.
