Thursday, September 20, 2012

Health Reimbursement Arrangement (HRA)

By:  Tonya Williams, Employee Relations Specialist
School District of Janesville

The past few years have been turbulent for both the economy and the healthcare industry.  In fact, health insurance costs for both employers and employees costs have risen faster than the cost of living.  To control costs for everyone, many employers are now offering a consumer-driven health plan that includes a pre-tax vehicle to help employees with their out-of-pocket costs.  In the District there have been discussions regarding a Health Reimbursement Arrangement (HRA) option for the employees who have the District’s health insurance plan. 

An HRA is an employer-funded benefit plan, without any salary reduction, that reimburses employees for qualified medical expenses.  There are three important features:  (1) It can be rolled over year-to-year if the employer chooses to do so, (2) funds deposited and dispersed are tax deductible to the business and tax free for the employee, and (3) the employer can set whatever reimbursement limit is best for everyone as there is no state or federal law on limits at this point.

An HRA may be a financially attractive option for many of our employees because the employer contributes the funds to pay for qualified health insurance premiums and medical expenses.  The HRA option plan the District is currently exploring would use an HRA to reimburse deductibles.

An employee may ask how would an HRA option benefit me?  Deciding on the HRA is a personal preference.  Under this option, an employee would not pay a premium, but the deductible is an annual $2,000 for an individual plan or $4,000 for a family plan.  The District would reimburse the second $1,000 of the individual $2,000 deductible or reimburse the second $2,000 on the annual $4,000 family deductible.   If you are on a single plan, you would save $444.36 ($37.03 per month) per year in premiums.  If you are on a family plan, you would save $1,390.08 ($115.85 per month) per year in premiums.  If you are healthy, and don’t incur many health insurance claims, you may want to explore this option to save costs in premiums.  This option also incorporates a $25 office visit co-pay and $25 urgent care co-pay; therefore, you still have access to preventative care and cost-effective care for office visits.

As the District explores new health care options, offering employees plan options and flexibility to go to the doctor of their choice is a priority.  An HRA option allows flexibility for our employees and their families as well as encourages our employees to have more awareness on how they are spending their health care dollars.  Remember you are your best health insurance consumer!

**Disclaimer:  The District is currently exploring the use of an HRA.  A HRA has not been recommended at this time.  This blog is an informational piece regarding HRAs and intended to educate members on healthcare insurance.

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