In the past five years, there has been an increase in the number of employees opting for high-deductible health plans. High-deductible health plans are defined as those with deductibles for family coverage and individual coverage. The growth of these deductible health plans has led to the increase of health savings accounts (HSAs) and health reimbursement arrangements (HRAs). As an employer, you need to be conversant with HRA info to determine whether they are right for you.
What is an HRA?
An HRA is an arrangement, which in combination with high-deductible health accounts pays for those medical expenses that your insurance policy does not cover. If your medical expenses are less than the deductible, you can cover them with an HRA.
Should I Consider It?
There are 3 main reasons why you may want to consider an HRA:
• Flexibility and control. Employers retain control over HRAs and determine how the funds within them can be used.
• Unused funds are retained in the account. If an employee has not spent the funds in the HRA at the end of the year, the employer can retain them in the account.
• Non-portability. The funds in an HRA are not accessible to employees. These funds are referred to as notional dollars and can only be spent when submitted to the HRA to be reimbursed.
How Does the Funding Work?
Contributions for every individual within the medical plan are made by the employer. To determine how much money can be spent, the funds must be included annually in the expense line of the employer for financials.
Since 100% of the contributions to the HRA are made by employers, they can be accessed at any time by employees for medical expenses. However, the funds are not portable, meaning that the employee cannot cash the money out as in HSAs.
Many employers utilize the carryover function, which is a unique feature of the health reimbursement arrangement. This function allows them to roll over all or a part of the remaining money year to year. Usually, employers build up the dollars over a cycle of 3 years and use them to cover the expenditure of their medical plans.
An employer has many freedoms and choices within a health reimbursement arrangement. Covering the medical expenses of employees should be a priority, and the team at Advanced Reimbursement Solutions helps with determining how to structure contributions to the HRA among many other services. We have locations in Phoenix and Wilmington. Contact us today to book an appointment and learn more.