HRAs: An Innovative Alternative for Financing the High Cost of Medical Insurance
The number one concern for small business owners providing employee benefits is the high cost of medical insurance. Employers are constantly searching for affordable, comprehensive coverage that they can count on. FEBCO has a new solution for this dilemma.
The new strategy is to combine affordable high deductible medical insurance with a Health Reimbursement Arrangement, a federally approved funding method. You can save on premium and your employees get major medical protection with first-dollar or early dollar benefits that can grow from year to year!
The Health Reimbursement Arrangement or HRA is a very flexible program that enables you to reimburse employees for medical expenses, or in some cases insurance premiums. The HRA is based on self-funding concepts, but with additional advantages.
Together, a high deductible health plan and an HRA can provide the perfect combination of affordability, flexibility and security for employers with healthy groups who are willing to assume a little more risk in exchange for significant premium savings.
Your choice of high deductible health plans along with an HRA plan can offer groups premium savings of 30-40% (and often more) while still providing quality major medical coverage.
The federal government granted great flexibility in HRA design so you can structure a program that satisfies your benefit plan goals as well as the needs of your employees.
HRAs offer enhancements over other established funding methods. HRAs enable you to use tax deductible dollars to reimburse your employees for qualified medical expenses. HRA funding can come from the premium savings realized in moving from an expensive, benefit-rich, low deductible health insurance plan to a low-cost high deductible plan. Your HRA contributions create a more attractive benefit package for employees who may object to a high deductible plan.
HRA Advantages for Employers
- You do not need to pre-fund the account
- You retain ownership of the funds if the employee terminates
- HRAs are available to any size group
- You have great flexibility in HRA plan designs
Employers determine:
- The amount to contribute to the HRA
- Who pays healthcare expenses first you through your HRA contribution or employees
- The amount that can be rolled over to the next year
- What happens to unused funds when an employee leaves
- The timetable for making your contributions
- Whether to place a cap on the amount that can be accumulated over time and the amount of the cap
- The number of HRA plans to be offered you can have different plan designs for different classes of employees subject to nondiscrimination rules