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MSP reporting for 1-person HRA (Medicare Secondary Payer)
When an individual covered by a 1-person HRA reads the Medicare Secondary Payer (MSP) reporting rules, the first impression might be that even a 1-person “group” plan is required to file quarterly MSP reports. Read on to learn how MSP reporting applies to 1-person or self-employed HRA plans.
Medicare and COB
Coordination of Benefits (COB) rules kick in when an individual is covered by more than one health insurance policy. For example, when you are married and both you and your spouse are covered by a health plan through your respective employers, your coverage will pay first for any medical treatment you receive, up to the limits of your plan. Your spouse’s coverage may kick in for any expense over and above the limits of your plan, and, in most cases, primary coverage for your children is determined by which parent’s birthday falls earliest in the calendar year.
Medicare has its own COB rules, called MSP or Medicare Secondary Payer rules. In most cases, Medicare is the secondary payer when someone is covered by both Medicare and an employer-sponsored group health plan.
This issue comes up more often since Social Security raised the eligibility age for retirement benefits. Today, people born in 1948 or later now become eligible for full Social Security benefits at age 66, not 65. Persons born between 1955 and 1960 are on a gradual scale to age 67. Plus, there’s a financial incentive of up to a 24% higher benefit for people who wait as long as age 70.
Since Medicare has not changed its eligibility age, everyone who has paid FICA taxes still becomes eligible for Medicare coverage at age 65. This means more people than ever are covered by both Medicare and an employer-sponsored group health plan. Medicare Secondary Payer (MSP) rules require employers to report these employees so that MSP applies when a Medicare claim is submitted.
MSP reporting with 1-person HRAs
Do self-employed individuals or micro-businesses with a 1-person HRA plan covering a person with Medicare coverage subject to quarterly MSP reporting? Probably not, but maybe. Here’s what you need to know:
- Medicare is automatically the primary payer when the employer has fewer than 20, or 1 to 19, employees.
- Where there are fewer than 20 employees in a group plan, those employees do not need to be included for MSP reporting, with one exception:
- Any employee diagnosed with End-Stage Renal Disease (ESRD) and covered by Medicare must be reported for MSP regardless of employer size;
- This includes active employees as well as those covered by an employer-sponsored group health plan in retirement or via COBRA; and,
- MSP applies even if the health plan has a provision that states it pays secondary to Medicare.
For more information on the 1-person HRA and other tax-saving benefit plans, these articles may be helpful:
Section 105 HRA plans save tax dollars – $149 for 1-person micro-business owners
Core Documents Releases New 2018 Product Brochures for Tax-Free Benefit Plan Document
Why Every Employer Should Have a Section 129 DCAP FSA Plan