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Does a group coverage HRA require a high deductible health plan?

Written by: PeopleKeep Team
January 14, 2021 at 11:12 AM

When researching different health reimbursement arrangement (HRA) options, employers may notice that when group coverage HRAs (GCHRAs)  are mentioned high deductible health plans (HDHPs) are discussed too. Because of this, a common question employers have is whether or not a GCHRA must be paired with an HDHP?

The quick answer is a GCHRA can be offered with any group health insurance plan, but there are certain advantages to coordinating a GCHRA with an HDHP.

In this article, we’ll cover what an HDHP is, what a GCHRA is, and explore the pairing of the two plans.

Let’s dive in.

What is a high deductible health plan?

The IRS guidelines, updated for 2021, defines an HDHP as a health insurance plan with a minimum deductible of $1,400 for an individual and $2,800 for a family. An HDHP’s total annual out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $7,000 for an individual or $14,000 for a family. The limits don’t apply to the cost of treatments or services that were rendered out-of-network.

What is a GCHRA?

A GCHRA is a health benefit designed for small and midsized employers offering a group health insurance plan. Only employees participating in the organization’s group health insurance policy can participate in a GCHRA. Rather than covering the cost of insurance, a GCHRA is designed to reimburse for healthcare costs that are not covered by the employer-provided insurance plan.

Many employers find that their traditional group health insurance plan comes with annual rate hikes and high premium costs. In these cases, offering an HDHP alongside a GCHRA can help organizations minimize the cost of offering a group plan.

So, while an HDHP isn’t a required component when offering GCHRA, it can help to lower the cost of offering the health benefit.

Want to learn more? Download our quick, one-page guide to GCHRA

How does a GCHRA work?

A GCHRA is a great way for employers to keep within their health benefits budget since they can set a cap on spending. First, an organization determines an allowance that employees can use to pay for certain eligible expenses. Next, employers have the unique ability to control costs beyond the allowance by utilizing a deductible. With a GCHRA deductible, employers can set any dollar amount that employees must personally cover with their health care costs before being eligible to receive reimbursements.

Along with the chosen deductible, employers can set a percentage that employees are responsible for. In other words, for each expense that’s considered reimbursable, employers can define a specific percentage that employees will pay. This is usually referred to as cost-sharing or coinsurance and helps employers to further control costs.

After making an eligible purchase, employees submit proof of expense documentation to the HRA administrator. The documentation helps ensure reimbursed expenses are eligible and are reimbursed at the correct amount. 

Employers should keep in mind that choosing the right online benefits administration tool is especially important. Because  a GCHRA includes deductibles and coinsurances it’s especially important that expense reviews are accurate. With PeopleKeep, employers can be sure that every expense is reviewed and that allowance, deductible, and coinsurance amounts will be accurately tracked.

Curious to know how a GCHRA differs from an HSA? Download our comparison chart

Conclusion:

A GCHRA plan can be used with either a traditional group health insurance plan, or an HDHP. When paired with an HDHP, employers can save significantly on premiums costs. The resulting higher deductibles employees are faced with are offset by the allowance provided by their employer. Unlike other HRAs a GCHRA can be offered by an employer of any size. This makes it a good option for many organizations looking for a way to offer a group plan and control costs.

Topics: Premium Reimbursement, High Deductible Health Plans, Group Coverage HRA

Additional Resources

Trying to decide which HRA is best for you? Take our quiz to find out.
Get our guide on how to offer health benefits with a small budget.

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