Why are HRAs becoming increasingly popular?

Health reimbursement accounts (HRAs) have increased in popularity
because a benefit package which provides quality health care within a
manageable healthcare budget can be designed. Regulations provide a
business with the flexibility needed to build an HRA within its budget while
fulfilling health care needs of employees.

Why would an employer choose to offer an HRA?

Employers today are faced with tough health care decisions about whether to
increase the cost to their employees or decrease the amount of coverage.
Since neither option is desirable, an HRA can be an excellent alternative for
many businesses. The employer can purchase high deductible health
insurance coverage that provides quality coverage at an affordable rate and
then subsidize the employee's out-of-pocket expenses through HRA funding.
The employer provides health insurance coverage to the employees at a rate
that most or all can afford with added choices and control for the employee.

What is the difference between HRAs and FSAs?

An HRA is funded solely by the employer. No employee contributions are allowed.

There is not a use-it-or-lose rule with HRAs. In an HRA, the employer has the option of letting the
employee carry-over all or a portion of the unused funds. In an FSA, the employee needs to be careful
in estimating expenses because if the employee does not use all the money, the remainder will be
forfeited at the end of the plan year.

In an HRA, the employee can only be reimbursed for the amount the employer has contributed to date
less any prior reimbursements. The employer has the option of contributing monthly, quarterly, or
annually. In an FSA, the entire election amount is available for reimbursement on the first day of the plan
year.

While most employers will choose a 12-month coverage period, it's allowed to choose a shorter
coverage period.

HRA regulations do not require the expense to be incurred during the plan year; but the employee must
have been a participant in the HRA when the expense was incurred. The business has the choice of
allowing this option or not

Why should an employer offer an HRA in addition to an FSA?

Employees cannot contribute to an HRA, but typically expect to have more expenses than can be
reimbursed from an HRA. Employees can set aside tax-free funds to pay for additional medical
expenses if a business offers both an HRA and FSA.

Any time an employee saves on payroll taxes, the employer has corresponding savings. An HRA and
FSA combination is a win win for a business!

How will an HRA benefit my business?

An HRA is an excellent option to fight the battle of the health insurance rate increases. HRAs offer the
following for businesses:

1. Flexibility to design plans to enhance your employees' benefits

2. Reduce your monthly insurance premium expenses to a manageable level

3. Insurance carrier independence that is very important

4. Operate a more affordable health care expense budget

How does an HRA provide more choices and control?

A health reimbursement accounts (HRAs) flexibility gives an employer the opportunity to design it with the
features that the business wants. Below are listed some of the choices that an employer can make.

Linked vs. Stand-Alone or Unlinked

The first decision is whether the HRA is or is not linked to the employee's health insurance policy. A linked
policy is designed to pay deductibles and/or co-pays under the policy and the employee is required to
participate in the health insurance. A stand-alone or unlinked policy is not connected with an insurance
policy in any way.

Tiers, Deductibles, and Co-Pays

You can set all these variables up for an HRA.

1. Tiers with different limits for single employee, family, etc.

2. A deductible to meet before reimbursement begins

3. Required co-pays

Carry-Over Option

HRA regulations permit, but do not require unused funds to be carried over to the next coverage period.
Employers decide whether carry-over is allowed and whether to put restrictions on the carry-over.

What is meant by carrier independence?

HRAs are not dependent on the insurance carrier. Changing insurance carriers does not mean that an
employer must change HRAs.

What type of insurance plan should an employer offer?

A HRA can be designed to fit with any health care insurance coverage. The most profitable approach
involves the traditional High Deductible Health Coverage (HDHC).

HDHC

The employer purchases high deductible health insurance coverage at significantly lower premiums,
and then creates an HRA to cover the difference between the previous deductible and the HDHC
deductible.

This tactic will save your business money without creating more out-of-pocket expense for your
employees. A win win!

Can I use an HRA with a PPO or HMO?

An employer can by designing the HRA to cover all or a part of the health insurance deductibles and
copays. This can improve the benefit structure, but you will not receive as large of an overall
premium reduction as you will when utilizing an HDHC.

Can an employer offer wellness benefits?

Businesses appreciate the cost savings advantages of having healthier employees, so wellness
programs are an important option in HRAs.

A wellness program is designed to provide information related to overall health and wellness, and
includes disease prevention, disease management and recommendations on age specific screening.
The goal is to promote better health practices in employees before they develop chronic illnesses that
can affect their quality of life. For those employees with a chronic condition, the focus is to educate
them to be better informed about the management of their condition.

Can a business self administer an HRA? How is the service handled?

A business can self administer their HRA or choose to outsource to an
independent administrator.

At the time of service, employees present their health insurance ID card and
pay any co-pay or out-of-pocket expenses as they would in a non-HRA
environment. After an employee receives an Explanation of Benefits (EOB) for
a covered expense from their health insurance carrier, the employee submits
the documentation to the employer or administrator for HRA claim
processing. The employer or administrator validates and processes the
claim, and reimburses the employee for the eligible expenses, up to the
annual maximum established by the employer.