 Health Reimbursement Accounts (HRAs)
The best way to make insurance programs more affordable is to pay only for what is used. Before reducing benefits, survey your employees to find out if they are using the carrier’s network, if there have been any hospitalizations, chronic conditions, special needs, etc. Then review your current plan(s) benefits with an eye towards excess.
Contributions:
- Base employee Contributions on Lowest Cost Plan and allow employees to “buy up” to a Higher Cost Plans or
- Structure contributions to encourage employees to choose the low plan
- Defined Contribution – set a dollar amount that will be paid toward benefits
- Set a dollar cost employer will pay based on salary ranges
- Pass rate increase on to employees
Benefit Changes:
- Split office copays so the copay for specialists is higher than that for primary care physicians
- Add a deductible to Rx
- Or change the Rx to a copay for generic drugs and a percent reimbursement for all others
- Increase the out-of-network deductible
- Increase the out-of-network coinsurance
- Add an in-network deductible that doesn’t apply to office visits
- Add an in-network coinsurance that doesn’t apply to office visits
- Add a hospital copay
HRAs & HSAs
How Do You Trim Wasted Benefits and Lower Health Care Premiums?
Obviously, if you reduce benefits you reduce costs. But what do you do if some employees need more services than other. You can have more than one plan, but that’s only part of the solution. The goal should be to provide comprehensive coverage that meets employee needs and does not exceed them. While, at the same time, addressing the requirements of employees with special needs so they have access to the care they need without financial hardship. And rewarding employees for assuming responsibility for their health through preventive health programs
Where do you start? Recognize that employees only appreciate what they use. Because of this, choice is important (to a degree). Changing employee behavior through education and preventive care programs will have the most long term impact
Here are two of the newest strategies designed to lower insurance premiums and make employees cost conscious: Health Reimbursement Accounts and Health Savings Accounts. The concept behind both is to use health insurance for catastrophic costs, while giving employees a pool of money they manage for smaller costs to “buy back” the reduced benefits as needed. The objective is to make them better consumers of health care
 Health Reimbursement Accounts (HRAs)
An HRA works by restructuring your health benefits to trim fat and lower costs on wasted benefits.
We do an audit and poll your employees to design a plan that fits their exact needs. Then we identify the wasted benefits they don't use. Next, we design a plan that takes out first dollar payments for unused benefits and saves you thousands of dollars. To shield your employees from the unexpected costs you can allocate funds to a tax sheltered account to cover your employees’ out-of-pocket expenses. Best of all, you define what expenses will be covered, how much and when they will be reimbursed.
What's amazing is that statistics show that 80% of employees never use this money and it stays in the company’s checkbook. HRA's give the employer total control over funds and save on average, will over $5,000 per year.
What are the advantages for the employer?
- Eliminating first dollar coverage for unused benefits reduces costs significantly
- The money remains in the company checkbook until an expense is incurred
- The employer defines what is covered, sets dollar limits per employee per year
- Reimbursement is tax deductible
- HRA funds can be used as part of an incentive program to promote healthy behaviors
What are the Advantages for the Employee?
- Their contributions towards benefits are usually lowered
- Reduces the burden on the employee to meet higher out-of-pocket expenses
- Long Term Care insurance premiums can be paid from an HRA
- Unused funds can be rolled over for use in future years (at the employer’s discretion
Health Savings Accounts
Health Savings Accounts (HSA), are a special tax free savings account where money is deposited by either the employee, the employer or both, combined with a qualified High Deductible Health Plan. The money is deposited into an account similar to an IRA. The account is funded on a tax deferred basis and accumulates tax free. The funds are available to pay for expenses not reimbursed by the health insurance plan. They can also be withdrawn for qualified medical expenses not included in the health plan, such as eyeglasses, tax-free. Any remaining funds can be rolled over into the next year.
What makes these plans so effective is that the high deductible health plan encourages the employee to become involved in paying for his medical expenses.
How it Works:
Participation in an HSA requires that the employee elect a High Deductible Health Plan and open a custodial savings account, (either with the carrier or any other qualified financial institution). Withdrawals are made from this account by either a debit card or check until the requisite deductible is met. At that time, when the deductible is satisfied the health plan is responsible for any additional covered medical expense. If the employee does not use the full deductible the unused amount is rolls over and accumulates along with any interest or investment income produced by the funds in the account.
What are the advantages for the employer?
- Lower Premium: High Deductible Premiums are considerably less than those for traditional plans; as a result the cost of funding the plan is reduced.
- Lower Payroll Taxes: HSA contributions are pretax and reduce FICA cost.
- Liability Shifts to the Employee: The employee owns the account so record keeping and responsibility is no longer the venue of the employer.
What are the Advantages for the Employee?
- Independence: The decision as to how to spend their health plan dollars is in their control.
- Contributions are Tax Deductible: HSA deductions are above the line and qualified withdrawals are tax free.
- Benefits are more liberal: Qualified medical expenses include services not usually covered by a medical plan (Sec 213d) IRS code and High Deductible Health Plans cover a wide variety of preventive care services.
- Portability: funds belong to the employee and can go from employer to employer, fund COBRA and early retirement.
- Flexibility: HSA funds can be invested in any IRS approved investment, plus interest and earnings accumulate tax free.
- Retirement: The funds that remain in the HSA can carry forward to retirement and fund medical expenses including Medicare part A and B or Long Term Care. They may also be withdrawn for purposes other than medical purposes and are taxed at the individual rate.
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