Health Reimbursement Accounts (HRAs) are the chassi for defined contribution plans (DCPs), and are essentially "business expense accounts for healthcare". Here are 15 facts about HRAs.
1. Health Reimbursement Accounts Provide Financial Control for the Employer
Employers are able give employees their HRA allowances monthly or annually, or at any time on an exception basis. Employers also control which medical expenses are eligible for reimbursement, and the HRA plan documents can be changed by the employer at anytime during the plan year.
2. Health Reimbursement Accounts Provide Choice for the Employees
With an HRA, the employee is in full control of their healthcare. They can choose to use the HRA money to reimburse medical expenses and health insurance plans of their choice. With an HRA, the employee chooses the carrier and plan that best fits their family's needs.
3. Health Reimbursement Accounts Allow Employers to Lower Health Insurance Costs
Employers can purchase lower cost high-deductible health insurance and establish an HRA plan. They might choose to provide their employees broader overall coverage at a significantly reduced cost.
4. Health Reimbursement Accounts Allow Employers to Fix Healthcare Cost
Through the HRA plan document, the employer decides what the contribution will be. Unlike health insurance, which is technically described as a defined benefit health plan, the employer is not required to increase employee contributions when the insurance company increases premiums.
5. Health Reimbursement Accounts are Easy To Administer
Group health insurance plans require employers to invest substantial time and resources into the administration and management of a traditional group health plan. With HRAs, the administration can take less than 5 minutes per month, allowing the HR staff to focus on real HR issues.
6. Health Reimbursements Accounts Are Extremely Flexible
The HRA plan allows employers wide latitude in determining who is covered under their plan, when participants become eligible, and whether they may retain benefits during a leave of absence or following termination. At the employer's option, HRA plans can cover part-time employees and seasonal workers, or only full-timers or veteran employees.
7. Health Reimbursement Accounts are Exempted from State Insurance Rules
State-mandated coverage that must be included in the traditional group health insurance plans are one of the factors driving up health insurance costs. HRAs are exempt from these provisions.
8. Health Reimbursement Accounts Allow Annual Roll-over
Unlike the "use it or lose it" medical reimbursement plans of the past, HRA plans allow employers to rollover participating employees' unused benefits to future years. So instead of going on a health care spending spree every December, employees can be given an incentive to be smart healthcare consumers. Employees know that dollars saved today on an unnecessary prescription, for example, will be available to them later, for a more useful purpose, such as an annual exam or eyeglasses.
9. Health Reimbursement Accounts Do Not Require Pre-funding of Separate Bank Accounts
Unlike Health Savings Accounts (HSAs), HRAs do not require a separate account to hold the funds.
10. Health Reimbursement Accounts Improve Cash Flow
There is no need to pre-fund the healthcare expenses in an HRA. Employers may simply use a pay-as-you-go accounting / administration system for the best cash flow efficiency.
11. Health Reimbursement Accounts Need to Comply with IRS, HIPAA, ERISA and ACA Rules
Employers should utilize an IRS/HIPAA/ERISA/ACA compliant HRA administration platform to ensure compliance with applicable regulations.
12. Health Reimbursement Accounts are Available in Every U.S. State
Contrary to many health insurance professionals' belief, HRAs are available in every state.
13. Health Reimbursement Accounts Are Easy to Understand
Unlike health insurance plans that use difficult language, HRAs are easy to understand - it's simply a business expense account for health care.
14. Health Reimbursement Accounts Provide Broader Coverage Than Traditional Health Plans
The IRS allows more items to be covered in an HRA than any insurance company allows under a health insurance plan. Items like chiropractic care and alternative medicine can be covered under an HRA.
15. Health Reimbursement Accounts Eliminate Claim Disputes
HRAs are free from the inherent conflicts that plague health insurance plans. There is no adversarial relationship between the plan administrator and the plan participant. In fact, the plan administrator and the employee share a common interest. That is, to have the HRA benefit paid tax-free to the employee.
