What Is an HRA?
A Health Reimbursement Arrangement (HRA), also known as a Health Reimbursement Account, is a type of plan where an employer can reimburse qualified medical expenses incurred by employees. It allows an employer to essentially self-insure coverage gaps in their group insurance plans for things such as dental care or health insurance copays.
The employer decides who is eligible, how much they qualify for, and what expenses are reimbursable. They could choose to let unused funds roll over into a new year or not. Because it’s an employer-owned account, the employee would not be able to take it with them should they leave the company.
Plan Documentation Is Required
In order to set up an HRA, an employer must have a Section 105 plan. This would be outside of any Section 125 cafeteria plan the employer may already have in place. While an employer could self-administer an HRA, they would need to adhere to all compliance regulations. For this reason, many choose to outsource.
Use in Conjunction With a Health Plan or to Replace Other Benefits
There are many practical applications for HRAs. If an employer wants to provide funds to reimburse for expenses applied to a deductible, for example, an HRA is a great way to do that. Or, they can offer an HRA in lieu of a traditional group dental insurance or group vision insurance plan. HRAs can be designed to cover a wide range or a very narrow selection of medical expenses as set forth by the employer.
Employers Can Find Cost Savings in HRAs
Because the parameters of an HRA are specified by an employer, they’re able to control costs to some degree. The contributions made to the HRA are tax-deductible, which translates to savings. Additionally, employers may find that offering an HRA instead of other benefits could save money because only those who actually have expenses will use the money. There’s also less risk to an employer than putting funds into an HSA.
To help you determine if an HRA is a good fit for your organization, request a free HRA quote below today, and an MSIG insurance agent will walk you through your options!
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As an independent agency, we are here to help you find the right HRA solution.
As an independent agency, we are here to help you find the right solution.