HRA is a good option to consider for employers in the US seeking affordable and beneficial healthcare plans for employees. Also known as a Health Reimbursement Arrangement or Account, HRA is basically an IRS approved, tax advantaged and employer funded health benefit plan that provides great benefits to both sides, the employee and the employer.
Under HRA, the employer makes contributions into employee account and also provides reimbursements for qualified expenses, allowing employees to pay for medical expenses that otherwise may not be covered under their health insurance.
If you’re wondering how this fully employer funded plan arrangement can help you save on healthcare, then continue reading to find out.
- As Health Reimbursement Arrangement is a tax advantaged program, it means that reimbursements for qualified medical expenses are absolutely free of tax for the employees and, which you, the employer, can write off as a business expense to enjoy savings.
- Also, you can use Health Reimbursement Arrangement to save money on healthcare by integrating it with health insurance coverage which can help you enjoy savings on premiums of up to 20 percent by offering HDHP (High Deductible Health Plan) instead of a standard health plan.
Let’s take a closer look at how high deductible HRAs can help you save money on healthcare:
Suppose that the deductible on your group plan currently is 1,000 US dollars, annually and you want to raise this deductible to about 5,800 US dollars so that your employees can easily qualify for HSA. The insurance carrier will probably lower the group plan premium to nearly 1,500 US dollars/employee for such a large increase in their deductible.
To make sure that this change is acceptable to your employees, you (the employer) offer every employee a 1,000 US dollars per year high deductible HRA with the combination of new HDHP. The high deductible Health Reimbursement Arrangement pays 100% of all health/medical expenditures up to 1,000 US dollars annually while rolling over the unspent amount for future years.
Approximately 80% of the employees utilize less than 1,000 US dollars annually in healthcare. These employees immediately get 1,000 US dollars a year improvement in their health benefits while your company will save about 500 US dollars on health premiums and any unspent HRA amount. Among the 20% employees remaining who consume over 1,000 US dollars annually on healthcare, those who consume about 1,000 to 2,000 US dollars will also benefit while others who consume more than 2,000 to 5,800 US dollars will have out of pocket expenses up to 3,800 US dollars.
To learn more about HRAs or for expert assistance with HRA, call JS Benefits Group on 877-355-6070.
