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.

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 insurance 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

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.