Paired together, these two options can help employers gain big health benefit savings, but employers may wonder how HRAs can work with group health insurance and if using an HRA requires an HDHP.
What is a high deductible health plan?
An HDHP is a medical plan with lower monthly premiums and a higher deductible than standard health insurance plans. Out-of-pocket healthcare expenses are generally not covered until the annual deductible is reached, or the out-of-pocket maximum has been met.
The Internal Revenue Service (IRS) classifies HDHP coverage as having a plan with a minimum deductible of $1,400 for single coverage and $2,800 for family coverage. An HDHP’s maximum annual out-of-pocket expenses, including deductibles, copays, and coinsurance, can’t be more than $7,050 for single coverage or $14,100 for family coverage.
Many organizations pair an HDHPs with a health savings account (HSA). An HSA is a tax-advantaged employee-owned fund that helps your employees save pre-tax dollars on out-of-pocket medical expenses.
While HSAs help offset the deductible and other expenses that come with HDHPs, keep in mind that you must have an HSA-qualified HDHP to make contributions to your employees’ HSA. Additionally, HSAs are portable, meaning that HSA funds stay with your employees even if they leave the company.
The overall advantages of HDHPs are:
- Lower monthly premiums than PPO plans
- HSA eligibility with specific HSA-qualified HDHP plans
- Larger provider networks
If you choose an HDHP, your employees will still be 100% covered for preventive care from in-network providers before meeting their deductible due to Affordable Care Act (ACA) requirements. So if you have a workforce that is generally young and healthy, an HDHP is a good way for them to receive basic care while you save money overall.
What is a health reimbursement arrangement?
An HRA is an IRS-approved, employer-funded health benefit used to reimburse employees for qualified medical expenses and health insurance premiums. HRAs are flexible because they allow employers to set an allowance amount, and employees to purchase the healthcare that best suits their needs. Once expense documentation is submitted, they are reimbursed for the cost.
With HRAs, employers reimburse employees only after the employees incur an approved medical expense. This feature is beneficial for employers that want to retain control over their cash flow. Additionally, unused funds stay with the employer if the employee quits.
The overall advantages of HRAs are:
- Cost control by setting a monthly allowance
- Tax-free reimbursements
- More employee involvement in their own healthcare decisions
The two most popular HRAs offered are the qualified small employer HRA (QSEHRA) and individual coverage HRA (ICHRA). QSEHRAs and ICHRAs are used as alternatives to group health insurance, but an integrated HRA works with them.
An integrated HRA is a tax-advantaged arrangement to help employees pay for eligible expenses and out-of-pocket medical costs that aren’t fully covered by your group health insurance.
Does an integrated HRA require an HDHP?
If your group health insurance plan comes with annual rate hikes and premiums, then an integrated HRA plan is for you. Unlike HSAs, you don’t need an HDHP to use an integrated HRA, it can help keep your costs down while providing great employee benefits. This HRA can bridge the gap between offering a group plan and minimizing premium costs in these cases.
The overall advantages of combining an HDHP along with an integrated HRA are:
- Unique capabilities to set HRA deductibles, cost-sharing, and coinsurance
- Lower overall costs using an HDHP
- Offset employee high out-of-pocket costs with HRA reimbursements
The integrated HRA that PeopleKeep offers is a group coverage HRA (GCHRA). If you manage your GCHRA benefit with PeopleKeep’s administration software, documentation review and HRA compliance is all handled for you by our HRA experts.
Specific HRAs only work with individual health insurance plans, but integrated HRAs are special. They can be used with any type of group health insurance plan, and when paired with an HDHP, employers can save significantly on premiums and healthcare costs. This feature makes them a good option for employers offering a group plan to control costs.
If you think an integrated HRA is the way to go for your business, then PeopleKeep’s GCHRA is right for you. Schedule a call with one of our personalized benefits advisors, and we will get you set up with a GCHRA today.
This article was originally published on January 14, 2021. It was last updated on March 4, 2022.