Yes, you can. Individual Coverage Health Reimbursement Arrangements (ICHRAs) and Medicare can work together—and in many cases, they’re an ideal match. In fact, employers can use ICHRA to reimburse Medicare premiums for eligible employees. With the right administration platform and strategy, this model offers flexibility for mixed-age workforces while staying compliant with federal regulations.
In this guide, we’ll cover who’s eligible to use ICHRA with Medicare, what Medicare expenses can be reimbursed, and how to stay compliant without extra admin burden.
The quick cut
- You can use an ICHRA with Medicare and get reimbursed for Medicare premiums, Medigap plans, and qualified out-of-pocket expenses
- Employees must have Medicare Parts A & B or Part C to qualify for ICHRA
- Compliance rules are strict, but platforms like Zorro simplify verification and documentation
- Employees with existing Medicare coverage can report their plan and receive reimbursements
ICHRA and Medicare: Understanding eligibility requirements
Not all Medicare-eligible employees automatically qualify for ICHRA. To be eligible, they must have one of the following:
- Medicare Parts A and B (Original Medicare)
- Medicare Part C (Medicare Advantage)
Just having Part B isn’t enough to meet ICHRA’s minimum essential coverage (MEC) requirement. That detail matters when transitioning from group health insurance to ICHRA. Employees often only enroll in Medicare Part A while on a group plan, but they can use a special enrollment period to add Part B without penalty once that group coverage ends.
What Medicare expenses can ICHRA cover?
An ICHRA can reimburse Medicare premiums along with other eligible expenses. Here’s what’s typically reimbursable through an ICHRA:
- Medicare Part B premiums
- Medicare Advantage (Part C) premiums
- Part D prescription drug plans
- Medigap (supplemental) policies
- Out-of-pocket medical expenses, such as deductibles, copays, and eligible services
This flexibility makes ICHRA a smart solution for employers with Medicare-eligible employees. It allows companies to support a wider range of employee needs without sacrificing predictability or budget control.
ICHRA and Medicare: Staying compliant without the headache
Combining ICHRA and Medicare introduces a few extra compliance considerations—but it doesn’t have to create complexity.
Here’s what employers need to keep in mind:
- No double-dipping: ICHRA can’t reimburse expenses already covered by Medicare.
- Coverage must remain active: Employees need to maintain qualifying coverage and verify it regularly.
- Avoid reimbursement design traps: Employers cannot build ICHRA plans solely around known Medicare gaps.
- Documentation is required: Every reimbursement needs supporting proof of coverage and payment.
Zorro’s platform is built to handle these requirements automatically. We verify coverage, flag eligibility issues early, and manage the paper trail so employers and employees don’t have to.
What if employees already have Medicare coverage?
Employees who already have qualifying Medicare coverage can still participate in ICHRA. With Zorro, reporting an existing plan is fast and easy:
- Log in and select “Report Existing Plan”
- Upload proof of Medicare coverage
- Look out for your confirmation.
It’s that simple. From there, we coordinate with payroll teams to set up reimbursements. Employees keep the coverage they’re comfortable with, and we handle the compliance behind the scenes.
In conclusion
So, can ICHRA reimburse Medicare premiums? Yes—and, when set up correctly, it’s a seamless and compliant solution that benefits both employers and employees.
If your workforce includes Medicare-eligible team members, ICHRA can give them more flexibility while giving you more control. Curious what this could look like in practice? Book a demo to see Zorro in action or download our ICHRA guide to learn more.
