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    • Flexible Benefit, Cafeteria Plans, & Tax Advantaged Plan Options
    • Health Reimbursement Arrangements (HRAs)
    • Health Savings Accounts (HSA) Implementation
    • Commuter Company Benefits
    • Employee Benefit Plan Type Comparison
    • Employer Benefit Plan Eligibility Requirements
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Health Reimbursement Arrangements (HRAs)

What is an HRA?

  • Defined Contribution Health Plan
  • A Fixed Cost Health Plan
  • Employer Funded (No employee dollars allowed)
  • Increases employee cost control and responsibility for health care

What is eligible as an HRA expense?

  • All Code 213 expenses are eligible
  • Health expenses and health premiums
  • Long Term Care Insurance premiums
  • Excludes: Disability and life insurance premiums, long term care services

Who can participate?

  • Employees, their spouses and dependents
  • Retirees, their spouses and dependents

Who cannot participate? 
S-Corporation Owners, Partners, Sole Proprietors, LLC and LLP Owners

Can domestic partners participate? 
Plans can be available to domestic partner:

  • Impute premium value
  • Employee pays premium for domestic partner with after-tax dollars
  • HRA pay-out is then tax free from HRA to domestic partner

Do Flex Rules apply to HRAs? 
The following Flex Benefit Plan rules do not apply to HRAs:

  • Use It or Lose It
  • 12-month election and utilization requirement
  • Uniform coverage rules
  • No premiums allowed in a Health FSA - they are allowed in HRAs

Can HRA dollars be cashed out?

  • Never can be cashed out
  • Not for termination, death, or with severance pay

Can a correlation exist between Flex Plans and HRAs?

  • No Salary Reduction dollars ever allowed in a HRA
  • Safe Harbor rule: premiums in a HRA cannot exceed COBRA premium values
  • No direct or indirect correlation between salary reduction and HRA dollars

Who pays first HRAs or Flex Plans?

  • The employer decides, based on plan design
  • Set up Plan Documents to designate order and covered items (Flex & HRA)
  • Employer has complete control to specify
  • If the Employer does not specify order of payment, Flex pays second

Do ERISA rules apply?

  • IRS ignored Title I because -
    "if they had to work with the DOL the program
    would never roll out"
  • Expect future Summary Plan Description and Reporting Requirements

Are there reporting requirements?
Un-funded plans with less than 100 participants - No Funded plans or plans with 100 or more participants are subject to ERISA
5500 Form may be required by DOL

Are there non-discrimination rules to follow?

  • Yes, same as for all other 105 Plans
  • Equal contributions for all eligible employees satisfies this requirement
  • Equal utilization NOT required

Does COBRA have to be offered?

  • Yes, always
  • Can be bundled with group health COBRA election
  • How to factor premiums is a concern
  • Give option to "spend down" or to purchase under COBRA

Do unused dollars have to be carried forward?

  • No, The employer determines how much (if any) and aggregate amounts
  • Participation can stop at termination with or without spend-down period
  • Must always offer COBRA

Does an employer have to fund the accounts?

  • No pre-funding is required
  • Can invest dollars
  • Can use HRA dollars toward administration

What design options are there?

  • Bundled Accounts
    Must be on health insurance to be eligible
  • Un-Bundled Accounts
    Not required to be on company health insurance
  • Eligibility
    Employee only, Employee & Spouse or Family
  • Payments
    As earned (accrued) or available anytime
  • Spend Down
    Usually 90 days, could be 30 days or even no limit

Most Popular HRA Model
Deductible Model

    • High Deductible Insurance Plan
    • HRA Account - Pays 50% of deductible
    • HRA pays deductible after 1st $500 Paid
    • HRA pays 100% of deductible
    • Employee pays regular office visit co-payments, prescriptions, dental, vision etc.
    • Employee uses Flex Plan to pay out-of-pocket health expenses with pre-tax dollars
    • Employee and Insurance Share other eligible medical expenses (co-insurance 80% - 20% etc.)

Advantage:

    • Easy to design and administer
    • Shared cost of increased out-of-pocket deductible expense by employer and employee

Disadvantage:

    • Hard to estimate utilization
    • Budget concerns (national statistics say 22% use deductible)

Results:

    • Some short-term cost-controls
    • Little of no effect on consumer behavior

HRA Self-Funded & Insured Model
HRA and Voluntary Insurance

    • High Deductible Insurance Plan
    • HRA Account - Certain dollar amount available - allowed to be used for any expense and/or to purchase supplemental health premiums
    • Employee pays regular office visit co-payments, prescriptions, dental, vision etc.
    • Employee uses Flex Plan to pay out-of-pocket health expenses with pre-tax dollars
    • Employee and Insurance Share other eligible medical expenses (co-insurance 80% - 20% etc.)
    • Supplemental Health pays hospital deductible and/or other benefits (accident, cancer etc.). Can include long term care insurance premiums

Advantage:

    • More choice by individual employees
    • Shared cost of increased out-of-pocket expenses (deducible and other)
    • Easier to budget - usually lower dollar amount per HRA account

Disadvantage:

    • More employee utilization
    • More administration

Results:

    • Some cost-controls
    • Little or no effect on overall consumer behavior

Most Innovative Model 
Larger Employer Groups Only (100+)
Goal to Move toward Consumer Behavioral Change

    • HRA $1,200 Single / $2,400 Family
    • HRA Account pays all medical expenses (office visits, prescriptions, lab etc.)
    • Discounts for in-network providers
    • Expenses for all medical providers allowed
    • GAP - $500 Single / $1,000 Family
    • Employee pays GAP / uses Flex Plan to pay out-of-pocket health expenses with pre-tax dollars (vision & dental expenses)
    • Co-insurance 80% - 20% etc. - then
    • 100% insurance paid, thereafter

Features:

    • Annual Preventive Wellness Check Up paid at 100% (max. $200 single & $400 family)
    • Wellness dollars DO NOT carry forward to next year
    • Wellness Coach and Chronic Illness Manager provided at no charge
    • Internet Access to network doctors, hospitals (usual fees and ratings provided)
    • Internet Access to prescription costs and options recommended for various conditions

Advantages:

    • Drives behavioral change
    • Encourages early diagnosis, chronic condition control, prescription choice and cost awareness and changes overall levels of utilization

Results:

    • Total shift in Health Care with focus on Employee Education & Choice
    • Health trend changes in 3 to 5 years
    • Whoever holds the money is in control... now the consumer is in control.

Facts:

  • National health care just surpassed $1,400,000,000,000 (15% of GDP)
  • Will double by 2008 (unavoidable)
  • Costs will increase on average 16% in 2003
  • Past three years - increase combined has been 49%

Detriments to health:

    • 10% - Insufficient access to care
    • 20% - Genetics
    • 20% - Environment
    • 50% - Behavior (poor diet and minimal exercise top the list)
    • 60% of large employers are moving toward consumer-driven health care
  • National Carriers are developing similar models

Health Care Utilization:

No or low utilization (75% of consumers / using 10% of health care)

    • Preventive Care
    • Acute illness or injury

Medium utilization (20% of consumers / using 15% - 20% of health care)

    • Multiple acute visits
    • Chronic illness

High utilization (5% / using 50% - 70% of health care)

    • 15 priority diseases / conditions - poorly controlled
    • Unpredictable catastrophic condition

Example of Consumer / Provider Utilization Problem

  • 1989-99 there were 6.7 million visits by adults to the doctor for sore throat
  • Antibiotics were prescribed for 73% of all visits
  • Antibiotics indicated only 15-17% of the time ( for strep throat)
  • Inappropriate use of drugs - Most costly were used 70% of the time Penicillin, Erythromycin recommended at a cost of $2 per course of treatment Azithromycin, Flouroquinolones prescribed instead at a cost $40 - $80 per course of treatment
  • Antibiotic resistance is a growing major health concern
  • Cost of this care:
    Employee:$10 - $25 dollars
    Employer:$100 - $200 dollars

Case Study - Fortune 500 Employer

  • Plan with of 60,000; 1,500 tried new consumer-driven model
  • Plan usage dropped 11% 1st year
  • Prescription drug utilization declined 6%
  • Employees maintained similar levels of preventive / wellness care
  • Highest users of health care - showed greatest reduction in use (while still getting the necessary care)

Detailed Plan Information:

  • Flexible Benefit, Cafeteria Plans, & Tax Advantaged Plan Options
  • Health Savings Accounts (HSA) Implementation
  • Employer Benefit Plan Eligibility Requirements
  • Employee Benefit Plan Type Comparison
  • Employee Benefits and Tax Savings
  • Health Reimbursement Arrangements (HRAs)
  • Commuter Company Benefits

Benefit Administration Jobs:

Benefit positions in your area:

Try using "employee benefits",  "HSA benefit administrator", "Flexible Benefits administrator", etc. to find the best results.

Are you Aware of Transit Benefits?

Commuter Company Benefits

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Employee Benefit Plan Type Comparison

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Savings

Employee Benefits and Tax Savings

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