TRICARE Secondary Payor Rules: Final Regulations Issued
The Department of Defense issued final regulations relating to TRICARE secondary payor rules (seeEmployer Coverage? TRICARE? Beware! from the April ’08 Benefit Beat, andNew TRICARE Provisions Affect Group Health Plans from Nov. ’06 Benefit Beat). In summary, these rules are similar to the Medicare secondary payor rules. If an individual entitled to TRICARE is actively working, the employer cannot do anything to incent the individual to choose TRICARE over the employer’s sponsored health plan. In other words, the employer cannot, in any way, incent the employee to choose TRICARE, rather than the employer’s plan. This choice strictly rests with the individual. Furthermore, an employer is prohibited from paying for a TRICARE supplemental plan.
For coordination of benefit purposes, if an individual participates in both TRICARE and the employer-sponsored group health plan, the employer plan pays first, and TRICARE pays second.
The regulations do allow the choice between qualified benefits and cash through the terms of a valid cafeteria plan, as long as this choice is available to all eligible employees, without regard to TRICARE eligibility. A valid cafeteria plan can allow a fully employee-paid TRICARE policy to be purchased with employee money through the cafeteria plan. In this event, the employer’s involvement must be strictly ministerial, i.e., the employer only provides the payroll function, and does not, in any way, contribute towards or endorse the TRICARE policy. The employer must maintain written proof, in the form of a certification, that all requirements have been met.
For reasons unrelated to cafeteria plans, it is still imprudent to allow individual policies to be purchased through a cafeteria plan. When a salary reduction contribution is made through an IRC §125 plan, the contribution, in effect, becomes an employer contribution. Thus, for many purposes, the individual policy becomes an employer-sponsored plan, subject to laws and regulations such as:
- HIPAA, including the certification requirements;
- ERISA, including reporting and disclosure requirements;
- Medicare secondary payor rules; and
- Nondiscrimination rules under Title VII of the Civil Rights Act.
Penalties for violating the ban on TRICARE incentives could result in a civil penalty of up to $5,000 per occurrence.
These rules become effective June 18, 2010.
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.