How Health Care Reimbursement Plans Help Employers AND Employees
Dan Levenson February 02, 2016
As health care becomes more complicated and expensive for businesses (especially small businesses), are health care reimbursement plans the way to go?
If you’ve never heard of these reimbursement plans, it’s time to learn about potential maximum savings on premium costs. Abbreviated as HRA (for Health Care Reimbursement Arrangement), this plan has ways to help you and your employees save on taxes as well as health care.
Basically, you set aside a fund that your employees use for their own health care expenses. It’s only possible if the plan gets funded exclusively by you. Reducing salary to make this happen isn’t allowed, though it’s more beneficial financially than you think.
Another stipulation is that funds go only toward health care expenses. While this may sound like there are too many restrictions, it’s really one of the most flexible health care plans in existence.
When you see the details behind the benefits, you’ll see why both employers and employees are using HRA’s more often to escape rising health insurance premiums.
Working Alongside High-Deductible Health Plans
A common occurrence is an employer using a HRA with a high-deductible health plan. Abbreviated as HDHP, these plans are self-explanatory in having higher deductibles, though resulting in lower premiums.
If you decide to use one of these plans, using a HRA becomes more beneficial. You’ll have more money saved from premium savings to place into your HRA fund.
This helps you bridge the gap between the high deductible and the expenditures for employee health care coverage. It’s something you should look into as proof it’s not entirely impossible to save in business health care costs.
Flexibility on Funds
The flexibility on HRA’s mentioned above extends to giving you freedom on what the funds cover. You can make the HRA more comprehensive and cover all medical expenses, or you can limit this to certain health care events like visiting the ER or perhaps general illnesses.
You could decide this based on past track records of your employees and the illnesses they typically get in a year. While you can’t predict all illnesses, covering common medical problems (perhaps associated with their job) can give your employees more peace of mind.
Tax Savings for Your Employees
Your employees benefit from a HRA equally as much as you do. Along with the reduced premium after using the HDHP, your staff has access to medical funds before reaching their health care plan deductible.
Workers are also able to pay other health care expenses that don’t relate directly to medical treatments. Things like co-pays continue to become more expensive every year. A HRA can pay those, plus co-insurance, or sideline treatments like dental and vision.
All funds aren’t taxable to the employee either, giving them major tax savings along with your tax deductibles.
Other Aspects to Health Care Reimbursement Plans
When you start a HRA plan, you have some other things to think about pertaining to rules and regulations. HIPAA compliance is mandatory to keep all employee medical data private. This additionally centers in on non-discrimination with all of your employees.
One open rule you’ll appreciate is you can carry over all HRA funds from year to year, which isn’t possible with flexible savings accounts. Ultimately, you have the freedom to determine how much of the funds you want to carry over for employees.
You can get full reimbursement for medical expenses when turning in the EOB (explanation of benefits) from an employee’s health care provider.
Here at InsureYourCompany.com, we have reliable data and experts available to help you get set up properly with a HRA. Contact us so we can help your business find proper insurance coverage and documentation.