This article provides an overview of group coverage health reimbursement arrangements (HRA)s, also called integrated HRAs, and how employers use them to achieve health benefits cost savings.
A Health Reimbursement Arrangement (HRA) is an IRS-approved, employer-funded medical expense reimbursement plan. An HRA allows an employer to reimburse employees tax-free for eligible out-of-pocket medical expenses and individual health insurance premiums - so long as the plan complies with new health reform regulations.
What Is A Group HRA?
A group coverage HRA, or integrated HRA, is an employer-funded medical reimbursement plan linked with a group health insurance plan - usually a high-deductible plan.
The group coverage HRA is offered only to those at the company who take part in the group health insurance plan, as it is a supplement to help employees with their deductible costs.
With a group coverage HRA, the company sponsors a group health insurance plan but is looking to lower the cost of premiums while keeping employees' coverage (risk) the same.
- First, a company would purchase a high deductible health plan to achieve savings with lower premiums (for example, switch from a $500 deductible to a $2,500 deductible health plan).
- Second, the company would offer a group coverage HRA to cover the difference between the old and new deductible (in this example, $2,000 annually).
The company realizes savings because employee utilization of the HRA tends to be 30-50% depending on the plan design.
Employees use the group coverage HRA to be reimbursed for out-of-pocket medical expenses. With group coverage HRAs, it is common for the plan to only reimburse deductible or co-insurance expenses that are also covered under the group health insurance plan. An Explanation of Benefits (EOB) is typically required with each reimbursement request.
To summarize, generally with a group coverage HRA:
- The company sponsors a high-deductible health plan (HDHP).
- The company sponsors a group coverage HRA plan to reimburse out-of-pocket medical expenses (often just deductible/co-insurance expenses covered by the HDHP).
- Allowances are given annually, and there is no rollover of unused funds year to year.
Group coverage HRAs are also commonly known as integrated HRAs.
How Health Reform Impacts group coverage HRAs
Health reform has brought sweeping changes to the health insurance industry, including how employers can use HRAs.
However, employers offering (or planning to offer) a group coverage HRA should work with their broker to confirm that their group health insurance plan, combined with the HRA, meets all health reform requirements.
Other Types of Health Reimbursement Arrangements (HRAs)
In addition to Integrated HRAs, HRAs are used in the following ways:
- Individual Coverage HRAs
- Qualified Small Employer HRAs
- Retiree HRAs
- Limited-Purpose HRAs (ex: dental only, vision only
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