A Health Reimbursement Arrangement Plan (HRA) is one of the more recent attempts to control the rising cost of providing employee health benefits. HRA plans can take many forms, but all plans feature an element of employee choice and accountability for utilization of health care services.
HRAs Support Consumer-Driven Health Plan Concept
In its most basic form, an HRA plan would contain a high deductible health insurance plan with a commensurately lower monthly premium. The premium dollars the employer saves by offering a less costly health insurance option is redirected into individual accounts for employees. Employees may withdraw money from their account to pay for deductibles and copayments required under the medical plan, or to pay for services not covered by the plan, such as dental care or vision services.
HRAs Compliment FSA Plans
HRAs mimic Flexible Spending Accounts - but with important exceptions. The money used to fund an HRA plan is employer dollars, not employee dollars as is typical in an FSA. Participants in an HRA plan who, through wise conservation or good luck, do not have to withdraw from their account to pay for healthcare services, can eventually accumulate a considerable "nest egg". Unlike an FSA, any funds remaining at the end of a coverage period (typically a 12-month period) may be carried forward to increase the maximum reimbursement amount in subsequent coverage periods. FSA plans require employees to forfeit unused funds.
Though very similar, HRA plans and Flexible Spending Accounts can compliment each other effectively.
HRA Plans Present Many Options
HRA funds can be made available annually, (for example, in January the HRA account for each participant is credited with $1,200) or made available monthly or quarterly, i.e., $100 is credited to the employee's account at the beginning of each month.
Plans may be designed so that an employee's Flex Account funds must be exhausted before the HRA plan will reimburse an employee for a covered expense.
Employers can "cap" the amount of rollover.
HRA plans can pay for Long Term Care premiums.
There are no funding limits as long as the plan is not discriminatory.
HRA covered services can be limited to health plan deductibles, copays
and benefits covered in the health insurance plan.
Enrollment in the HRA plan can be limited to only those employees who are also enrolled in the company-sponsored medical insurance plan.
HRA plans can be used effectively as a retiree medical benefits vehicle.- HRA plans are fully supported by the mbi Flex Convenience Card, including the roll-over feature.
For more information about HRA plans, contact your Broker or contact IHS.
