Health Reimbursement Arrangement (HRA)


Problem: Rising Cost of Group Health Insurance Premiums
Solution: A Health Reimbursement Arrangement (HRA)

HRA's have made a resurgence since passage of the "Affordable Care Act". The new law not only approves the use of HRA's but actually encourages them based on how health insurers must now price their product. The time has never been better to implement a legally qualified and tax deductible HRA.

AFFORDABLE: The net cost of an HRA can be 15% to 35% less than a traditional health insurance plan.

FLEXIBLE: Unlike Health Savings Accounts (HSA) and Flexible Spending Arrangements (FSA), HRA's can be custom designed to meet the specific needs and requirements of an employer and their employees

SIMPLE: Administration of an HRA is easy by using the services of a licensed, bonded "Third Party Administrator" who handles claims, eligibility and premium payment - at a very affordable price.

LEGAL: The Internal Revenue Service permits the establishment - and tax deductibility - of an HRA plan so long as it meets the requirements of Internal Revenue Code Section 105.

Most health insurers/health plans now permit employers to establish an HRA which is "wrapped" around that carrier's "high deductible health plan" (HDHP) product. An HRA can be wrapped with many of the new HMO and PPO plans that are available to large and small employers since 2014.


HRA (HEALTH REIMBURSEMENT ARRANGEMENT)

Real Life Example
Employer has 50 enrolled employees with 15 enrolled dependent units (total of 75 persons). Currently purchases traditional fully insured coverage (HMO/PPO dual option with "Platinum" level benefits). Currently monthly cost is $36,217 per month or about $434,609 annually (Proposed rate increase of 12% will bring annualized cost up to $486,760)

Considerations
Current
Plan
HDHP Plan
with HRA
ACA Benefit Level of Insured Plan:
"Platinum" PPO
"Bronze" PPO
In-Network Deductible:
$500 per person
$5,000 per person
In-Network Coinsurance:
80%
60%
In-Network Maximum-out-of-Pocket (per person):
$3,500
$6,500
Total Monthly Cost (50 EE's/25 DEP's):
$36,217
$15,954
TOTAL ANNUAL COST:
$434,604
$191,454
HRA Plan Related Costs-
Proposed HRA Plan Benefit (per person):
n/a
80% to $5,200
Maximum Total HRA Claims Paid (all participants):
$169,000
Annualized Administrative Cost:
$21,000
Annualized Employer Excess Loss Insurance Cost*:
$34,882
TOTAL ANNUAL COST:
$434,604
$416,336
Annual Savings assuming Maximum HRA Claims:
$0
$18,268
*Employer Excess Loss Insurance coverage issued by "A" rated surplus lines insurer has a $169,000 annual deductible paid by employer; Claims in excess of this are paid by Insurer up to a $169,000 annual aggregate benefit maximum.