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Health Reimbursement Arrangement

Another spoke in your employee benefits wheel.

Health Reimbursement Arrangement customized for your business needs

A health insurance plan, no matter how rich it is, will always have things it doesn't cover. Dental and vision plans can be very beneficial to employees, but not necessarily in the budget for employers. Employers can essentially self-insure these and other coverage gaps through health reimbursement arrangements.

Nearly 30% of employers use Health Reimbursement Arrangements (HRAs) to manage health costs. It’s a flexible, tax-advantaged option that’s changing the healthcare finance landscape.

This article explores how HRAs work, their benefits, and how they’re established.

It also delves into their cost-efficiency, making it clear why they’re gaining popularity.

So, if you’re an employer looking to take control of healthcare expenses, here’s what you need to know about HRAs.

Benefits and Flexibility

They’ve found that the benefits and flexibility of Health Reimbursement Arrangements allow employers to fill coverage gaps in health insurance plans, replace traditional dental or vision insurance, and maintain control over costs with tax-deductible contributions.

In assessing the benefits, they’ve noted the flexibility in reimbursing qualified medical expenses. It’s not limited to traditional health coverage but can also replace dental or vision plans.

The employer-centric nature of HRAs provides control over costs. They can determine the parameters, including contribution limits, and these are tax-deductible, further aiding in cost management.

They’ve also found that HRAs pose less risk than Health Savings Accounts, as only employees with expenses use the funds. Thus, HRAs offer a flexible, cost-effective solution for employers to provide health benefits.

Establishing the Plan

Setting up the plan requires careful attention to detail. Employers must comply with regulations, complete proper documentation, and decide whether to self-administer or outsource the administration.

They’ve got to establish a Section 105 plan, separate from any existing Section 125 cafeteria plan. If they opt for self-administration, they’ll ensure adherence to complex compliance regulations. Otherwise, outsourcing can step in to guarantee this.

Either way, creating accurate, comprehensive documentation is not optional; it’s a cornerstone of the setup process. The potential cost savings, tax advantages, and flexibility of Health Reimbursement Arrangements can be appealing. Yet, the initial steps to establish the plan are intricate.

Therefore, employers might consider seeking advice from an independent agency to ensure they’re making informed, financially savvy decisions.

Cost Efficiency and Savings

Employers can reap significant savings through the strategic use of this plan, controlling costs while offering a beneficial healthcare option to their employees.

Health Reimbursement Arrangements (HRAs) are a proven tool for cost efficiency. They provide a flexible way to fill insurance coverage gaps without the financial risks associated with Health Savings Accounts.

By defining the parameters of the HRA, employers maintain control over costs. They’re not out of pocket unless an employee incurs a qualifying expense. This precision limits financial exposure while still providing a valued benefit.

Plus, these contributions are tax-deductible, offering further savings. When implemented properly, an HRA isn’t just a healthcare solution, it’s a financially savvy strategy.

The potential for cost savings is significant, illustrating why HRAs are a smart choice for many employers.

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