A Health Reimbursement Arrangement (HRA) is an important tool in an employer’s overall benefits strategy. Properly designed, an HRA can help control the rising cost of providing employee health benefits. HRA plans can take many forms, but all plans feature an element of employee choice and accountability for utilization of health care services.
A Health Reimbursement Arrangement (HRA) is an important tool in an employer’s overall benefits strategy. Properly designed, an HRA can help control the rising cost of providing employee health benefits. HRA plans can take many forms, but all plans feature an element of employee choice and accountability for utilization of health care services.HRAs Support Consumer-Driven Healthcare Concepts
Most commonly, an HRA plan is offered in conjunction with a high deductible health insurance plan. The premium dollars the employer saves by offering a less costly health insurance option (higher deductible = lower monthly premium) is redirected into individual accounts for employees. Employees may withdraw money from their account as needed to pay for deductibles and copayments required under the medical plan, or to pay for services not covered by the health plan, such as dental care or vision services.
HRAs Compliment FSA Plans
HRAs mimic Flexible Spending Accounts – but with important exceptions. The money used to fund an HRA plan is employer dollars, not employee contributions. Unlike an FSA, any funds remaining at the end of a coverage period (typically a 12-month period) may be carried forward to increase the maximum reimbursement amount in subsequent coverage periods. Participants in an HRA plan who, through wise conservation or good luck, do not have to withdraw from their account to pay for healthcare services, can eventually accumulate a considerable “nest egg”.
HRA Plans Present Many Options
HRA funds can be made available annually, (for example, on January 1st the HRA account is credited with the full amount of the annual benefit of $1,200) or HRA funds can be credited to a participant on a monthly or quarterly basis, i.e., $100 is credited to the employee’s account at the beginning of each month. HRA funds remain with the employer until claimed by the participant, which is a distinct advantage over insurance premiums or Health Savings Accounts contributions. A typical HRA plan that we administer has up to one-half of the annual benefit dollars unclaimed at the end of the year.
Additional HRA features include:
- Employers can “cap” the amount of rollover, or design a plan with no fund accumulation.
- There are no funding limits as long as the plan is not discriminatory.
- HRA benefits are generally utilized to pay for health plan deductibles, copays and benefits covered in the health insurance plan.
- Enrollment in the HRA plan is limited to only those employees who are also enrolled in the company-sponsored medical insurance plan, or in another employer-sponsored health plan, such as the plan sponsored by a spouse’s employer.
- HRA plans can be used very effectively as a retiree medical benefits vehicle.
- HRA plans are fully supported by the Benefits Card, including the roll-over feature.
HRA plans are considered self-funded employee benefit plans under applicable regulations. IHS can assist you to develop a compliant plan design. We perform the required claims substantiation and claims payment, and we provide weekly and monthly reports to help you manage your plan.
Please contact us to learn more about Health Reimbursement Arrangements.