Group Health Reimbursement Arrangements - HRAs
Most employers that currently offer a health plan to their employees wish to continue doing so. Quality group health plans are often the very thing that attracts and keeps high quality employees on the team.
However, in this current pandemic environment, maintaining an employee health plan is becoming increasingly difficult.
The effect of the pandemic on health care coverage in America
The pandemic has and will continue to substantially alter the entire health insurance industry. The method of health care delivery that Americans have become accustomed to, is proving to be woefully inadequate in the face of this pandemic.
Our current system is breaking. Something has to give. A lot needs to change.
In this struggling economy, employers are under more pressure than ever to reduce costs. While there are several issues concerning health plan coverage in the U.S. that need to be addressed, the most pressing issue for employers is affordability.
The rising cost of health insurance impacts both the employer and employee in the form of unaffordable monthly health insurance premiums.
Good to know: Pick the right insurance policy. Take the time and put in the work necessary in order to select the right plan. In the state of Florida, for example, if you are shopping for a health insurance plan through the Affordable Care Act exchange, you will be offered around 100 plan variations to choose from. This doesn't even include all of the health plan options that are not on the exchange. So, regardless of where you live, you will likely find a confusing clutter of choices that you will need to sort through. In addition, you want a plan that includes your doctors and your medications, plus provides care for any chronic conditions. Information online can be incomplete or outdated, so call the doctors to make sure they're still participating in plans you're considering.
HRA's could be an important part of the solution.
Guidelines concerning Health Reimbursement Arrangements, or HRAs have been recently changed. HRA's usage was formally restricted to only pay for medical expenses - not insurance plan premiums. This is no longer the case.
HRA funds can now be used to pay for individual insurance premiums on the exchange or off the exchanges to satisfy the employer mandate - provided the HRA is deemed affordable.
Another very recent change now allows faith-based-health care sharing ministry plans to be included in health plans eligible for HRA funding.
The basic workings of employer HRA programs.
Individual Coverage Health Reimbursement Arrangements.
Within a business group ICHRA program (Individual Coverage Health Reimbursement Arrangements), employees can use funds allocated by their employer to buy health insurance on the individual market, subject to certain conditions.
ICHRAs may be especially appealing to small employers that wish to provide health plan coverage for their employees, but are unable to do so because of the high cost of traditional employer group plans.
The U.S. Departments of Health and Human Services, Labor, and the Treasury, which issued the new rules in June 2019, estimate that approximately 800,000 small businesses will offer ICHRAs to their employees.
Excepted Benefit Health Reimbursement Arrangements (EBHRA)
This type of HRA must be offered in conjunction with a traditional health plan. It allows employers to set aside a limited amount of funds ($1,800 per employee in 2020) to help pay for qualified medical expenses,
including premiums for vision and dental insurance, COBRA coverage, and short-term, limited-duration insurance (not offered in all states). It is available even if the employee declines to participate in the primary plan.
Employees cannot be offered both an ICHRA and an EBHRA. Certain rules (including nondiscrimination rules), requirements, and conditions apply.
Interesting Fact: The United States spends over $8,250 per capita on health care every year - that's over 22% higher than the next highest country in the world and over 170% higher than the average of the highest-spending 50 countries in the world. In 1960, the per capita cost of health care was $147 per person in America; adjusted for inflation, it would be $1,082 today; that means our current per capita cost has grown over 660% above and beyond normal inflation. As a portion of the gross domestic product (GDP), health care spending accounts for 17.7 percent. The U.S. is second in the world and first among developed nations for the highest health care spending as a percentage of GDP. The total amount of money spent on health care each year in the United States is $2.6 trillion, and it is expected to continue rising. By 2021, spending on health care each year is expected to be $4.8 trillion. It is estimated that 30% (about $750 billion) of health care spending each year is wasted.
A large swath of employers are not familiar with the workings and benefits of an HRA employer group plan. Because of this, many employers fail to take advantage of the benefits and savings HRA plans have to offer.
By utilizing HRA plans, most employers will not only trim their health plan costs, they will also trim the monthly premium costs for their employees. In addition, the employees will have more quality health plan options than ever before.
HRA plans can be a smart choice and a win-win for everyone.
Other articles: Is Short-Term Health Insurance Right For You?
Finding Short-Term Health Insurance.