When it comes to offering health benefits to your employees, group health insurance is the traditional choice, but it isn’t for everyone. For many small employers, the high costs, lack of flexibility, and complicated nature of group plans aren’t worth the hassle.
Instead, health reimbursement arrangements (HRAs) offer a quality health benefit that’s affordable, customizable, and simple for both employers and employees.
In this article, we’ll walk you through the three-step process for canceling your group health insurance plan and setting up your first HRA.
Step 1: Notify your current insurance provider
The first step is notifying your current insurance provider. You can reach out to your insurance company directly to let them know you’d like to cancel your plan, or you can connect with them through your broker.
Most group health insurance plans can be canceled at any time, although it’s a good idea to check your contract to make sure. The insurance company will want to know the effective date of your cancellation, so be sure you have a date in mind before you call.
We recommend giving 60 days’ notice so that you can notify your employees about the change and they can use their full special enrollment period to shop around for an individual policy that meets their needs.
Don’t forget to ask your current insurance provider for loss of coverage documentation for your employees so they can prove their eligibility when shopping for a new insurance plan. This will help your employees avoid any gaps in their coverage.
Step 2: Set up your HRA
If you’re enrolling in an HRA with PeopleKeep, setup is as easy as making a phone call! A PeopleKeep benefits advisor will ask you about your organization, employees, and goals before recommending an HRA that best suits your specific needs.
Once you’ve decided which HRA to offer (QSEHRA, ICHRA, or GCHRA), they’ll help you design and set up your new benefit in about 15 minutes. Be sure to include all key stakeholders at your organization on the call.
Before you call, make sure you have a few things handy, including your:
- Employer identification number (EIN)
- Credit card or other payment information
You’ll also want to make sure you’ve decided on how you want to design your HRA, including your:
- Employee eligibility criteria
- Allowance amounts
- Waiting period for new hires
Step 3: Notify your employees
This is the most important step, because your employees are the ones who are directly affected by this change. Since many of your employees may not have heard of an HRA before, be sure to inform them of the change and how an HRA works ahead of time so there won’t be any confusion.
When transitioning from a group health insurance plan to an HRA, the last thing you want is for your employees to view this as a downgrade, because in reality, it’s quite the opposite.
HRAs empower your employees to choose the healthcare plans and services they want while also providing value to those who may not have benefited from the group plan, such as those on a spouse’s or parent’s plan.
Most employees spend their allowance on insurance premiums, but depending on your plan design, they can also be used on over 200 eligible out-of-pocket expenses, including copayments, prescription medications, and even braces.
PeopleKeep will send your employees a formal email notification of their benefit, but we recommend first sending your own email from your HR department so your employees aren’t caught off guard.
What if I’m not ready to cancel my group plan?
If you like the familiarity of your group health plan, but know your employees would also benefit from an HRA, you don’t have to choose between the two. The group coverage HRA (GCHRA), or integrated HRA, is specifically designed for employers who want to offer a group health plan and an HRA together.
By combining your group health plan with a GCHRA, your employees get to keep the group coverage they’re already familiar with, plus get the added bonus of tax-free reimbursements on their out-of-pocket costs that aren’t covered in the group plan.
Replacing your group health insurance plan with an HRA is an ideal way for organizations both big and small to go from a complicated and expensive health plan to a hassle-free benefits solution that works for everyone. When you’re ready to make the switch, PeopleKeep is here to help!
This article was originally published on June 25, 2012. It was last updated May 27, 2021.