Another spoke in your employee benefits wheel.
Health reimbursement arrangements to help protect your employees.
A health insurance plan, no matter how rich it is, will always have things it doesn’t cover. Dental and vision plans can be very beneficial to employees, but not necessarily in the budget for employers. Employers can essentially self-insure these and other coverage gaps through health reimbursement arrangements.
Reimbursing employee health expenses on your own terms.
A health reimbursement arrangement, or HRA, is a type of plan where an employer can reimburse qualified medical expenses incurred by employees. The employer would decide who is eligible, how much they qualify for, and what expenses are reimbursable. They could choose to let unused funds roll over into a new year or not. Because it’s an employer-owned account, the employee would not be able to take it with them should they leave the company.
Plan documentation is required.
In order to set up a health reimbursement arrangement, an employer must have a Section 105 plan. This would be outside of any Section 125 cafeteria plan the employer may already have in place. While an employer could self-administer an HRA, they would need to adhere to all compliance regulations. For this reason, many choose to outsource.
Use in conjunction with a health plan or to replace other benefits.
There are many practical applications for health reimbursement arrangements. If an employer wants to provide funds to reimburse for expenses applied to a deductible, for example, an HRA is a great way to do that. Or, they can offer an HRA in lieu of a traditional dental or vision insurance plan. HRAs can be designed to cover a wide range or a very narrow selection of medical expenses as set forth by the employer.
Employers can find cost savings in health reimbursement arrangements.
Because the parameters of the HRA are specified by the employer, they’re able to control costs to some degree. The contributions made to the HRA are tax-deductible, which translates to savings. Additionally, employers may find that offering an HRA instead of other benefits could save money because only those who actually have expenses will use the money. There’s also less risk to an employer than putting funds into an HSA.
We can help you determine if a health reimbursement arrangement is a good fit for your organization. Reach out to us for more information.
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