Employer Coverage? TRICARE? Beware!
Effective January 1, 2008, secondary payer rules similar to the Medicare rules became applicable to group health plans covering individuals entitled to TRICARE, the health coverage available to families of military personnel, (see New TRICARE Provisions Affect Group Health Plans from Nov. ’06 Benefit Beat). The primary goal of this law is to insure that employers do not unduly shift the risk for health coverage to TRICARE. Specifically, employers, whether sponsoring insured or self-funded health plans, cannot, in any way, incent TRICARE eligible individuals to decline or drop employer-sponsored coverage in favor of TRICARE.
On March 28, 2008, the Department of Defense issued proposed regulations interpreting these rules. Of particular note is how the regulations propose to address cafeteria plans. According to the proposed regulations, an employer could continue to offer a cafeteria plan with the choice between qualified benefits and cash, as long as the choice is offered to all eligible employees, not just to those entitled to TRICARE. In no way could the cafeteria plan allow a TRICARE supplement since this would be an impermissible incentive to take TRICARE over employer-sponsored coverage. If these regulations are finalized, this would be a welcome clarification to employers, providing assurance that it would not be a violation of the rules to allow employees, including TRICARE-eligible employees, the choice between employer-sponsored health coverage and cash through the terms of a cafeteria plan.
Comments relating to these regulations are due by May 27, 2008. We will provide updates as they become available. In the meantime, employers should make certain that their health plans and programs do not in any way discriminate against or incent individuals to decline group coverage in favor of TRICARE.
The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.
As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.