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What is a Health Reimbursement Account?
Also called a Health Reimbursement "Arrangement" or HRA, these plans are essentially an employer-funded medical expense reimbursement plan. They are typically offered by employers seeking to offset the impact of changes in medical plan design that increase employee out-of-pocket expenses. The funds for HRAs come exclusively from the employer. Employee contributions are not permitted. As employers raise deductibles or make other plan design changes to reduce premiums, they take all or part of their savings to fund the HRA. They may also provide additional funds above the premium savings if they are willing and able. This helps the employees deal with the higher out-of-pocket costs. The HRAs may be restricted to medical expenses covered by the medical plan, or they can be used for medical, dental, and vision expenses for the entire family no matter where they have their insurance. A primary advantage of HRAs is that any funds unused by the employee during the plan year may be carried forward into future years. This allows employees an incentive to carefully manage their health care expenditures. Most employers implementing these plans experience smaller increases in medical premiums from year to year. What are the prerequisites?
The employer must be willing and able to fund employee out-of-pocket expenses at a pre-defined level.
A typical plan design provides a specific amount of money based on participation in the medical
insurance plan. For example, an employee with single medical coverage may get $500 in the HRA, but someone with
family coverage may receive $1,000.
The employee must be able to fund the expenses as they occur. Although it is unlikely,
some employees may have significant expenses as soon as the plan is implemented. Generally
the claims are spread fairly evenly throughout the year. Depending on medical plan design,
relative health of the employees, and other factors, much of the allocated funds are carried
into future years. This could create an increasing liability that should be accounted for
in annual budgets.
What are the costs?
HRA plans generally have an implementation fee that starts low and increases based on the number of eligible
employees. They also have a "per participant per month" administration fee that starts around
$5.00 and drops as the number of eligible employees increase. This fee may be subject to a monthly minimum.
Other optional services carry additional charges. Optional services may include
compliance services such as plan documents and nondiscrimination testing, printing
of communication materials (although "free" materials are available), debit cards to access
HRA account balances, and participation in employee meetings.
To set up an HRA Plan, you simply:
On an ongoing basis, you simply send funds to BenefitsWorkshop on a weekly basis to cover disbursements.
You will typically receive a disbursement report via e-mail each week and the funds are expected by the next
business day via wire transfer or ACH. We would also need information on newly eligible employees,
terminations and address changes.
That is essentially all that is involved, and BenefitsWorkshop can guide
you every step of the way. Our comprehensive guidance and materials
will make this one of the easiest programs you have ever implemented...and
probably the most cost-effective. We are also a quick e-mail away with the
answer to any questions that you can't find on our site.
First you request a proposal. Then you review the proposal to see the costs and the services to be provided.
Once you are satisfied, simply contact us and we will start the implementation process.
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