Introduction to Health Reimbursement Arrangements

A Health Reimbursement Arrangement, or HRA, is an IRS approved, employer-funded, tax advantaged employer health benefit plan that reimburses employees for out of pocket medical expenses and individual health insurance premiums. A health reimbursement arrangement is not health insurance. A health reimbursement arrangement allows the employer to make contributions to an employee's account and provide reimbursement for eligible expenses. A health reimbursement arrangement is an excellent way to supplement health insurance benefits and allow employees to pay for a wide range of medical expenses not covered by insurance.  It is often referred to (incorrectly) as a health reimbursement account.

The answer is yes in most cases.  The real answer depends on two things:

In preparation for a possible rulling by the Supreme Court against Obama's health care bill, the republican leaders in the house are drafting a bill to replace it.

According to the White House, 28 states are “on their way” to establishing new marketplaces, called health insurance exchanges, where consumers can begin to shop for health insurance starting January 1st, 2014.

It costs a typical employer the equivalent of 6-9 months in salary each time they have to replace a salaried employee—that’s $20,000 to $30,000 for a $40,000 manager in recruiting
and training expenses, along with the potential lost revenue from customers. 

The Medical Loss Ratio (MLR) final rules require insurance carriers in the small group and individual markets to spend at least 80% of the premiums toward the participants medical expenses. Insurance carriers insuring large groups must spend a minimum of 85% of the premium on medical expenses. Insurance companies that do not meet the minimum requirement must rebate the consumers a portion of the premium.

Now that 2012 has become reality, figuring out employee health benefits can be a daunting task for both employers and employees.  

Last week, the Centers for Medicare and Medicaid Services (CMS) released the annual National Health Expenditures report. Since 1960, this report has summarized trends in health care spending.

Earlier this month, SurePayroll announced December results for its monthly Small Business Scorecard showing a promising trend of small business owners expressing optimism about the economy. SurePayroll's Small Business Scorecard optimism score climbed to 63 percent in December compared to 53 percent in the previous two months, and up from only 33 percent in September. This would indicate a rise in small business hiring in 2012.

Extend Health Inc., a health exchange company, hopes to raise around $75 million with an initial public offering (IPO) of stock, according to a registration statement filed with the U.S. Securities and Exchange Commission.

The company runs the ExtendRetiree program, a private health exchange that helps employers switch retirees from traditional group retiree health plans into individual Medicare Advantage, Medicare supplement and Medicare Part D prescription drug plans.

Instead of paying paying the full cost of the new individual Medicare coverage, or a fixed percentage of the cost, the employer pays a set amount for each retiree who switches, the company says.  The platform makes use of defined contribution health plans and health reimbursement arrangements.  

Click here to read the press release. 

An annual California Employer Health Benefits Survey show that California health care costs are on the rise and the benefits are shrinking. According to the survey, the cost of employer sponsored health plans have risen 153.5% since 2002. This is 5 times faster than the increase of California’s inflation rate.

The survey also indicated that 36% of California firms said they were likely to raise the amount their employees would pay in 2012. 

How does California compare to your state?

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1. Lower Employer Taxes - Every small business owner needs to take advantage of every tax break they can find. By using a premium only plan (POP), small businesses immediately lower taxes, which means more cash. A reduction in payroll taxes can be quite significant for a small business.
2. Lower Administrative Costs - Many group plans feature high administrative costs. With a premium only plan (POP), health benefits costs drop to just $6-12 per employee per month.  
3. Easy to Set-up - Setting up a premium only plan (POP) is simple and small businesses can administer it online via the payroll system.  
4. Happier Employees - When employees make more money, they end up happier. By offering employees the ability to use a premium only plan (POP), a small business is automatically putting more money into employees' pockets. Small Businesses can use this to attract and retain quality employees. 
5. Lower Employee Taxes - In addition to lowering the businesses taxes, employees will also save income taxes with a premium only plan (POP). When they become a member of a premium only plan (POP), they will see a reduction in FICA, federal and state taxes.
6. Lower Insurance Costs - For employees who may have trouble making contributions towards their health plan, a premium only plan (POP) plan can allow them to save money on their health plan through the benefits of lower taxes. Even though the premium amounts may be the same as a regular plan, the tax savings that they will experience can help make up the difference. 
7. Better Coverage - Even though a premium only plan (POP) offers many dollar benefits, it does not skimp on the health benefits. Employees will enjoy full health coverage from a company that they can trust. 
8. More Take-Home Pay - One of the most popular benefits of a premium only plan (POP) is the ability for employees to take-home more pay each month.

According to The Employee Benefit Research Institute, participation in consumer-driven health plans increased in 2011.

As part of the Affordable Care Act (ACA), employers are required to report the cost of health benefits coverage under an employer-sponsored group health plan. 

As part of the Affordable Care Act (ACA), employers are required to report the cost of health benefits coverage under an employer-sponsored group health plan.