Tuesday, March 31, 2009

Health Reimbursement Arrangements (HRA's)

If you are like most business owners, you are frustrated with the high cost of health insurance. The new administration is, like past ones, continuing to discuss alternatives.

Until the time comes that someone comes up with a plan it makes sense that you would continue to look for competitve, cost saving alternatives. In these tough economic times it's tougher than ever to increase profits let alone face high insurance costs.

One option to consider is to consider educating yourself on consumer driven healthplans. There is alot of information circulating in regard to these plans. They include a number of options including HSA, HRA, FSA (both employee and employer sponsored) and CDHP plans. For informatio on what these mean watch one of the videos on our partner links.

Today I will focus on HRA's otherwise known as Health Reimbursement Arrangements. HRA's have been around for a couple of decades and, yet, are not widely understood. If you are a large employer you have the ability to enter into a self-funded plan and typically, if designed correctly, capture some savings by taking on some additional risk and managing your plan expenses and administration.

In the small group (under 50 employees) the risk associated with self-funding is usually too high. However, an HRA allows you to accomplish a similar model without the risk. You purchase a high deductible plan (typically 30-50% savings). With the savings you put together an analysis that wil allow you to reimburse your employees a good portion of the deductible when they do to a doctor. If designed correctly you can realize great savings and improve the benefits offered to your employees.

Along with HSA plans HRA's are one of the fastest growing plans among several carriers on the market today. In January Kaiser released two new HRA plans. Today (April, 1 2009) Aetna is releasing a couple of extremely competitive HRA plans. If implemented correctly you can anticipate 20-40% savings without much change in the benefits offered to your employees.

Advantages of HRAs for employers include: (wikipedia)

  • 20-40% Savings to your bottom line.
  • Only contribute if employee goes to doctor.
  • Reimbursements of qualified claims are tax-deductible for the employer.
Advantages of HRAs for employees include:

  • Contributions that employers make can be excluded from employees' gross income.
  • Reimbursements may be tax free if the employee pays qualified medical expenses.
  • Unused funds in the HRA can be rolled into future years for reimbursement.
  • HRAs may be offered in conjunction with other employer-provided health benefits including Flexible Spending Accounts (FSAs).
  • Employees do not have to be covered under any other health care plan to participate, unlike (for example) a Health Savings Account (HSA) which requires a High Deductible Health Plan.
You can look at Aetna's detail here. For more information and a complete analysis, give us a call at 650-533-8387 or send us an email.

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