Health Reimbursement Arrangements (HRAs) are employer-sponsored health-spending accounts that provide for reimbursement to employees for out-of-pocket qualified medical expenses incurred during the established plan year. HRA accounts can pay the same expenses as a Section 125 Medical Reimbursement Flexible Spending Account (FSA); however, unlike an FSA, only employers may contribute to the HRA. Typically HRAs are set up in conjunction with group health insurance. The value of an HRA is that it will allow the company to choose a health insurance plan that has higher copayment options and/or deductibles. The HRA is then designed to offset the employee’s out-of-pocket expenses. The HRA plan is established with predetermined limits and is funded by the employer.
Advantages to the Employer:
The employer benefits in two ways:
- Lower insurance premiums -- in some instances by 20-40%
- Tax deductibility of the HRA account
Not only does this combination save premium expenses, the premiums are usually tied to a health plan that will typically have lower than average premium increase at renewal. In addition to the cost savings and tax benefits, the HRA typically does not need to be pre-funded. It is simply an expense account tied to the employer’s general ledger. Only when expenses are paid are any deductions made from the employer’s account.
Advantages to the Employee:
The employee benefits in several ways:
- Medical reimbursements are made tax-free
- Employer funded
- Designed to offset out-of-pocket expenses
- Freedom of choice
- Less likelihood of premium increases
- COBRA compliant
The ultimate goal of an HRA is the creation of alternative approaches to financing and managing health plans that place more choice and responsibility on the employees and members while creating more predictable and controllable costs for the employer.
Capital Region Benefits will work to design an HRA that meets the client’s needs and provides the cost containment necessary in today’s healthcare economy.
HRA services provided by Capital Region Benefits include:
- Communication and materials and open enrollment meetings
- Plan documents and summary plan descriptions
- Authorization of, or direct reimbursement of, employee reimbursement requests
- Tracking HRA contributions from the employer
- Reconcile monthly reimbursements
- Customer service available Monday through Friday
- Provide monthly and quarterly reports as requested
- Annual reconciliation
- Coordination with COBRA administration services
- Integration of HRA plans
- Electronic notification and tracking of reimbursement requests and authorizations