A Health Reimbursement Arrangement, or HRA insurance plan, as it is commonly referred, is an employer-funded, tax-exempt health benefit plan designed to reimburse employees for out-of-pocket medical expense on pre-defined conditions. HRA funds can also be used to fund individual health insurance premium. It is important to understand from the onset that HRAs operate differently from the traditional health insurance plan. It allows the employer to make contributions to the employee’s account for purposes of reimbursing eligible expenses. This plan provides multiple health insurance benefits to employees while allowing them to pay for a range of medical expenses that are otherwise not covered by the insurance.
How an HRA Insurance Plan Works
In an effort to cut down on premiums, an employer can redesign the insurance plan by using the HRA to reimburse employees for pre-specified out-of-pocket medical expenses such as co-pays and deductibles. The amount contributed to the employee’s HRA account are offset by reducing the premiums due to the employee. HRA funds can be used to pay for any of the following expenses:
• Insulin and diabetic supplies
• Obstetrical expenses
• General hospital bills
• Co-insurance amounts
• Dental and orthodontic expenses
• Mileage for medical care
• Health insurance deductibles
HRA Benefits for the Employer
Thanks to a pre-defined contribution plan, HRA ensures maximum flexibility and cost control. This way, HRA enables the employer to offer a high deductible insurance plan while contributing the premium savings to the employee’s HRA account for future medical expenses on a pretax basis. All HRA contributions are 100% tax deductible and are not subject to any taxation, be it federal, state, or social security taxes. In addition, the employer gets to determine the contribution amount, who can participate, the expenses covered, as well as the payment frequency.
HRA Benefits for the Employee
HRA provides an employee with funds for use on medical expenses. In addition, any unused funds can be rolled over into the following year (employer discretion). The plan allows employees to accumulate funds for future medical needs such as retirement expenses. HRA funds can also be made available for COBRA premiums.
Health Reimbursement Arrangement (HRA) is an invaluable addition to any benefits package because it lets employers cut costs on healthcare-related expenses through the provision of employer contributions for an employee’s pre-defined medical reimbursement. By adopting this cost-effective consumer-focused plan, employers can channel the money saved through the plan to fund employee HRA insurance with tax-free money. This, in turn, gives employees control over their healthcare funds.
To find out more about the HRA insurance plan, speak to us at Advanced Reimbursement Solutions, with locations in Phoenix and Wilmington. Contact us today to get started!