Opening up more choices for employees to select the kind of healthcare insurance they want, and get reimbursed from expenses, it is no surprise that Healthcare Reimbursement Arrangements (HRA) are becoming increasingly popular.
Essentially, a healthcare reimbursement arrangement is an IRS-approved health spending account provided, owned and administered by your employer. The money in this account can be used for costs such as medical, dental, vision and pharmacy bills. Whether a certain expense qualifies for HRA is determined by your employer.
How does HRA work?
As the healthcare reimbursement arrangement account is controlled by your employer, only they have the authorized access to make transactions in and out of the account. Any taxes that apply to the money in the account are also paid by your employer.
In addition to managing expenses, the employer also decides how any remaining amount in the HRA account rolls into the insurance fun for the next year.
Payment designs
HRAs do not have a single rule regarding how the payment is made. Your employer has another decision to make: when and how the account pays for healthcare expenses. A couple of examples of these payment designs include:
HRA pays first: As the employee, you use the funds in the account. Once your HRA funds are gone, you pay all remaining expenses out of your own pocket.
You pay first: As an employee, you fulfill the expenses that are not covered by the plan. Once you reach a certain amount defined by your employer, the HRA pays the rest.
A number of small businesses prefer healthcare reimbursement arrangement over conventional health insurance programs because it is simple and time-effective, and can help employers better predict benefits budgets.
HRA benefits are generally offered to pair up with high-deductible health plan (HDHP), but this option can also complement other health benefits plans, or used alone.
Benefits of HRA
HRA benefits all types of employees—single workers, families, and upcoming retirees. Since this kind of health insurance is tax-free for employees, and the account reimburses most of your medical and related expenses, the advantages are considerable. A few of these include:
Design Flexibility: Health reimbursement plans can be customized for each employer. From defining coverage gaps to issuing debit cards, employers can agreeable options for HRA services.
Cost-Effective: For small businesses, HRA can be an advantageous option in terms of maintaining HR budget, and fit employees’ needs.
Employee Preference: HRA participants can choose the manner in which they want to spend their healthcare money, provided the expenses are within the parameters of the plan.
No Contribution Limits: With a health reimbursement account, employers are not bound by the restrictions of minimum or maximum money contributions that typically apply to a health savings account.
Employee Retention Tool: As specified earlier, the health reimbursement account can be used by different employees without with tax-free ease. Due to this, HRA is viewed as a favorable option.
It pays to have specialized help for maintaining your benefits administration process. As HR consultants and experts in benefits planning, we help employers and managers in Pennsylvania understand which health benefits option suits them. We also provide services for designing affordable group health care plans.
Reach out to us today to learn more.
