ICHRA and Medicare: how they work together

Yes — Medicare is qualifying coverage

An employee enrolled in Medicare is considered to have qualifying coverage for ICHRA purposes, so they can receive tax-free reimbursements. This makes an ICHRA a clean way to support employees who work past 65 or who are Medicare-eligible, without needing a separate retiree arrangement.

What an ICHRA can reimburse for Medicare

• Medicare Part B premiums
• Medicare Part D (prescription drug) premiums
• Medicare Supplement (Medigap) premiums
• Medicare Advantage (Part C) premiums
• Other qualified medical expenses, if the ICHRA is designed to include them

How it works for Medicare-eligible employees

A Medicare-enrolled employee submits proof of their Medicare coverage and applicable premiums, and the employer reimburses them tax-free up to their allowance — the same flow as any other ICHRA participant. For an employee working past 65, this can meaningfully offset Medicare premium costs while they remain on the job.

Working past 65

More employees are working past 65, and an ICHRA fits this trend well: rather than juggling a group plan''s coordination with Medicare, the employee stays on Medicare and the employer simply reimburses the premiums tax-free. It''s a straightforward way to keep supporting older employees'' coverage.

Rules employers should know

The usual ICHRA rules apply: employees in the same class must be offered the arrangement on the same terms, with amounts varying by age and family size. Medicare Secondary Payer (MSP) rules can apply to larger employers and affect how the ICHRA is structured for Medicare-eligible employees — a broker flags whether they apply to you.

Retiree HRA as an alternative

For former employees rather than active ones, a retiree HRA is the related tool — it reimburses retirees tax-free for Medicare premiums and medical expenses, and is exempt from some active-employee HRA rules. If your goal is supporting retirees, that''s usually the better fit; for active Medicare-eligible employees, the ICHRA works.

Medicare Secondary Payer rules to know

This is the nuance that catches employers off guard. Medicare Secondary Payer (MSP) rules generally prohibit larger employers (often those with 20 or more employees) from incentivizing Medicare-eligible workers to drop the employer plan in favor of Medicare. Because an ICHRA changes how you offer coverage, MSP interaction needs a careful look before you enroll Medicare-eligible employees. This is general information, not legal advice.

What an ICHRA can reimburse across Medicare parts

If your plan document allows it and the employee is enrolled, an ICHRA can typically reimburse a range of Medicare costs.

• Part B (medical) premiums.
• Part D (prescription drug) premiums.
• Medicare Advantage (Part C) premiums.
• Medigap (supplemental) premiums.
• Other qualified out-of-pocket medical expenses, if the plan permits.

Coordinating with a spouse on Medicare

Some ICHRA designs allow reimbursement of a covered spouse's premiums, including Medicare premiums, when the spouse is part of the employee's household and the plan document provides for it. The details vary by plan design, so confirm how yours is written.

A common ICHRA-and-Medicare mistake

The frequent misstep is treating Medicare reimbursement as automatic. Eligibility, MSP rules, and plan-document language all matter, and getting one wrong can create compliance exposure. For any Medicare-eligible employee, it is worth a quick review with a broker before you set the reimbursement up.