Important Option for Brokers in the New Era of Health Care

As insurance premiums continue to experience tremendous increases each year, employers are facing tough decisions regarding their health care options.  Employers are desperately seeking ways to lower health care costs while maintaining health care for their employees.  Brokers are challenged to find the right balance between cost and coverage. Your solution: combining the health plan with a Preferred HRA to offset changes in copayment or deductibles while allowing employers to maximize premium savings and limiting employee exposure to increased copayments or higher deductibles.  The Preferred HRA allows the employer to maintain the current level of benefit. 

A Health Reimbursement Account (HRA) is a tax favored, employer sponsored benefit program approved by the IRS (Section 105) that reimburses employees for qualified medical care expenses not already paid for by the employer’s health plan.    

HRA Benefits

• Cost Savings
• Control – the employer has the ability to select certain parameters for the plan
• No restrictions on the type of health insurance it is paired with; may be a stand alone.
• Off-sets increased out-of-pocket costs for employees while decreasing costs for employers.
• Minimal employer administration is required

How the HRA Works

The IRS designed the HRA to be very flexible.  This flexibility helps ensure employers can design programs that best meet their needs and the needs of their employees.  Increasing plan deductibles results in premium savings for the employer.  With the savings from reduced premiums, the employer may assume some or all of employee’s increased deductible exposure.  The HRA can fund any part of the deductible; the first part, the middle part, last part or split the deductible 50/50 from the first dollar.    

HRA premium savings almost always outweigh HRA expenses, netting the employer substantial benefit cost savings.  Unspent funds are generally forfeited; however the plan can be designed to carry funds forward to pay for claims in future plan years. 

Key features of an HRA

• Eligibility is based on employer design  
• Can reimburse out-of-pocket medical expenses and certain insurance premiums not reimbursed elsewhere
• Can permit carryover of unused amounts
• Can permit former employees to spend down arrangements
• Often offered in conjunction with HDHP but can also be a stand-alone plan
• HRA must be paid for solely by the employer
• May limit reimbursements to specific services; spend down is possible
• No legal limit on annual employer HRA contributions
• 12-month period of coverage rule does not apply
• Expenses incurred while a participant may be submitted for reimbursement at any time while still a participant (employer may impose more restrictive timing rules)
• No requirement to make additions in annual increments or make annual amount available throughout the year
• COBRA: HRA (even one with a spend down feature) must offer COBRA coverage for the maximum COBRA coverage period, not just through the end of the plan year
• Ordering rules apply when an HRA is paired with HSA or FSA
• Nondiscrimination rules apply

The Preferred Group offers:

• Plan design assistance; services covered, plan ordering, etc.
• HRA communication materials including Plan Document and Summary Plan Description
• Seamless administration between an HRA and an FSA when both are utilized
• Claim processing and document retention plus weekly reimbursement processing
• Toll free Customer Service 8am – 5pm Monday through Friday
• Benny™ Prepaid Benefit Card with 24/7 web based account access
• Quarterly reporting
• Annual end-of-year reporting
• Annual HRA nondiscrimination testing