Healthcare Reimbursement Arrangements (HRA)
- What is a Healthcare Reimbursement Arrangement?
- Why Would A Company Consider AN HRA?
- How Does A HRA Work?
- How Does The Deductible Get Paid?
- Many insurance companies will provide the claims data directly to HR Concepts so employees will not have to submit to HRC for reimbursement. This will allow HRC to process and pay the claim directly back to the employee without them ever having to submit any paperwork to us for reimbursement. After the claim has been processed, the funds will be disbursed in accordance to the methods as outlined by your plan.
- An employee can submit a claim online, mail it, fax it, or drop the claim off to us along with the proper documentation necessary to prove they have incurred the expense. Proper documentation may consist of a letter that they will receive from the health insurance company. This letter is called a letter of explanation of benefits (EOB). In some cases, a receipt from the pharmacy may be all they need to submit. The proper documentation will be outlined by the employer.
- An employer may authorize the use of claims submission through the use of a Visa card. If an employer authorizes this form of reimbursement, an employee will receive a Visa card from HR Concepts after they are enrolled. To use the Visa card, an employee simply presents it at an eligible location for an eligible expense. They may only use this card for eligible expenses and they must keep receipts, they may be contacted to verify the expense.
- Should An Employer Outsource The Administration?
An HRA is an arrangement that employers set up and completely funds to cover certain out of pocket, co-pays, co-insurance, and/or deductible expenses employees may incur associated with their health insurance plan. It is an arrangement whereby employers promise to pay certain expenses on behalf of the employee to help reduce their cost of medical expenses, for themselves, their spouse, and dependent children. This arrangement is 100% paid for, funded, and designed by the employer for the employee’s benefit.
Companies consider implementing HRA’S as a way to reduce the cost of health insurance premiums. By increasing the deductible of the health insurance plan, the premium to purchase the coverage can be reduced considerably.
HRA’s are designed to work in conjunction with a high co-pay, high co-insurance, or high deductible health plan offered by the employer. Traditional health insurance plans have low co-pays, low co-insurance, and/or low deductibles, but because the health insurance rates and medical expenses continue to rise, employers are deciding to design and implement HRA’s to reduce employees’ cost. By increasing the co-pay, co-insurance, and/or deductible, the cost of your health insurance premiums will decrease, but an employee’s out of pocket costs may increase. This is why employers implement an HRA to help employees reduce their potential out of pocket expenses while still providing them with a health insurance policy that offers complete coverage. HRA’s are effective in managing employees’ expenses, but they will be required to submit receipts or understand how to get reimbursed for an eligible expense covered by the HRA.
There are several ways an employee can get reimbursed from the HRA depending on the options an employer allows. Here are examples of how to get reimbursed:
There are many factors to consider when deciding to outsource the administration of paying the deductibles. Though pricing is important, it isn’t the only consideration to focus on. The employees will be submitting their claims for deductible reimbursement, and all of their personal information of what they had done will be on the EOB. Many employees will find this information private and may not want it shared with their employers. By outsourcing, the employer can get the claims paid, and the employee can rest assured that their information is kept confidential. It is also important to consider a Third Party Administrator who is setup for paying these types of claims. Employees are going to need an efficient streamlined process to receive their deductible money. Failure to reimburse an employee expediently could result in the employee receiving additional charges from their provider. Employers should consider using a TPA who can offer debit card processing for reimbursing the deductible. This would allow the employee to pay for their deductibles directly to the provider without having to submit claims for reimbursement.
Outline of Services
Initial Setup / Installation / Take-Over
- Initial Consultation
- Suggested Legal Documents
- Interface With Existing Broker / Benefit Consultant
- Setting Up Of The Systems
Whether you have a HRA program or not, HR Concepts will take the time necessary to analyze and develop the right HRA program to fit your company’s budget and benefit needs. We will integrate with your existing benefit programs and implement our procedures, which you customize, to keep your employees satisfied.
Whether it is a new plan or take-over, HR Concepts will provide you with suggested plan documents, summary plan description, and corporate resolution.
After we have analyzed your current Health Insurance design, HR Concepts will interface with your existing broker / benefit consultant to research available health plans and their costs.
In order to process the claims efficiently and accurately, HR Concepts, along with your input, will design the best procedures in order to manage claims. Your Health Insurance plan design and outline of benefits will be inputted into our systems and if your company chooses to utilize the debit card for payment of deductible, the cards will be ordered and programmed.
- HRAs may only reimburse participants for expenses incurred by employees, former employees, retired employees, their spouses and/or their dependents.
- Self-employed individuals may not be covered under an HRA. This includes partners in partnerships, members of LLC’s and 2% shareholders of S-Corporations. Rules of Attribution do apply.
- Domestic partners are not eligible for an HRA on a tax free basis because of the Defense of Marriage Act (DOMA). Employers may choose to allow domestic partners/same sex spouses to participate. If the employer chooses to allow domestic partners, they should enroll the domestic partner/spouse as the employee’s domestic partner/spouse. It will be important to keep in mind that the actuarial value of the increased value of the HRA should be reported as taxable income to the employee.