QUESTION: Our company is subject to the Medicare Secondary Payer (MSP) rules, and our insurer handles mandatory MSP reporting for our major medical plan. If we add a health FSA and HRA to our benefit offerings, would the MSP reporting requirements apply to those plans as well?
ANSWER: The MSP reporting requirements do not apply to health FSAs, but they do apply to HRAs with an annual benefit value of $5,000 or more. As background, the MSP reporting requirements are intended to help the Centers for Medicare and Medicaid Services (CMS) determine whether a plan is primary to Medicare—that is, whether a plan pays first, and Medicare is a secondary payer. The rules apply to “group health plans,” as defined under the MSP statute. Although health FSAs appear to fall within the MSP definition of group health plan, CMS has indicated that health FSAs are not primary payers subject to the MSP reporting requirements. On the other hand, HRAs (including individual coverage HRAs (ICHRAs), qualified small employer health reimbursement arrangements (QSEHRAs), and excepted benefit HRAs (EBHRAs)) are generally required to comply, but whether a particular HRA needs to be reported depends on the amount of its annual benefit.
CMS has indicated that the exception for HRAs with an annual benefit of less than $5,000 is based on the coverage level at the beginning of the year (e.g., the amount in the HRA account) and not on the amount of claims the HRA paid during the year. Amounts carried over from previous years are included when determining whether the current year’s annual benefit is less than $5,000. CMS officials have also informally indicated that HRAs with balances that may increase during the year (e.g., based on hours worked, or ratably throughout the year) need not be reported until the annual accruals equal or exceed $5,000.
You can find the latest information on the MSP reporting requirements in the MSP User Guide, which is on the CMS website. For most group health plans, the responsible reporting entity (RRE) is the insurer or TPA. (This is why your insurer handles the reporting for your major medical plan.) If you adopt a new health FSA or HRA, you may wish to engage a TPA to handle plan administrative duties, including MSP reporting for the HRA as its RRE.
For more information, see EBIA’s Group Health Plan Mandates manual at Section XXIV.J (“MSP Mandatory Reporting Requirement”) and EBIA’s Consumer-Driven Health Care manual at Section XXV.F (“HRAs and Medicare Secondary Payer (MSP) Requirements (Including Mandatory Reporting)”). See also EBIA’s Self-Insured Health Plans manual at Section XXV.C (“Coordination of Benefits With Medicare, TRICARE, and Medicaid”) and EBIA’s Cafeteria Plans manual at Section XXII.J. (“What Other Federal Laws Apply to Health FSAs?”).
Contributing Editors: EBIA Staff.