Exploring the Benefits of a Health Reimbursement Arrangement (HRA)
You may have heard about a health reimbursement arrangement (HRA) as a money-saving option for your benefits, but what exactly is it? Is it right for your company? Let’s break it down.
An HRA is a benefit plan where you, as the employer, cover a set amount of your employees’ out-of-pocket medical expenses. Expenses include co-pays, deductibles, and prescription drugs not covered by your regular health insurance. So, you set aside money to reimburse your employees as they incur covered expenses.
The great thing about HRAs is that they can work alongside other types of health coverage you may offer, such as high-deductible health plans (HDHPs) or health savings accounts (HSAs). This stacking of benefits means you and your people get extra financial protection for your healthcare expenses.
Why would your company choose to offer an HRA? For one, it can be a cost-effective alternative to traditional health insurance plans. The company can contribute a fixed amount to the HRA each year, and you’re not obligated to pay claims if your employees don’t use up all the funds. This condition allows your company to offer benefits with a higher deductible at a lower cost.
HRAs are also tax-advantaged. The money that goes into your HRA is from pre-tax dollars. Your employees don’t have to pay taxes on the reimbursements you receive.
From your company’s perspective, the HRA offers several advantages when it comes to benefit offerings:
- Cost control: By setting a specific budget for employee health expenses, HRAs help control healthcare costs for your company.
- Flexibility: HRAs allow you to decide which types of expenses are covered. This flexibility means you can tailor the plan to the company and employees’ needs.
- Compliance: HRAs help your company comply with the Affordable Care Act (ACA) by providing minimum essential coverage to employees.
- HSA compatibility: Pairing HRAs with HSAs creates comprehensive healthcare coverage. This allows you to save pre-tax dollars for healthcare expenses, and your company can also contribute funds to your HSA account.
- Employee satisfaction: Offering an HRA can help attract and retain employees because it provides additional financial assistance for healthcare costs.
- Complementary to other plans: HRAs can be used alongside other health plans, like HDHPs, to provide extra coverage for certain expenses.
So, if you’re looking for a way to help cover your medical expenses and your company is considering offering an HRA. It might be an excellent option for both your company and your employees. It’s a cost-effective and flexible way to provide additional healthcare support, and it can help keep everyone happy and healthy. See Aetna’s FAQs to learn more about these options for your benefits offering.