In order to set up a health reimbursement arrangement, an employer must have a Section 105 plan. This would be outside of any Section 125 cafeteria plan the employer may already have in place. While an employer could self-administer an HRA, they would need to adhere to all compliance regulations. For this reason, many choose to outsource.
They are owned by the employee, who can reimburse qualified healthcare costs to eligible employees. This allows employers to essentially self-insure and potentially save.
Medical expenses that are necessary, including annual check-ups, prescription drug costs, transportation costs, birth control pills, and more, depending on the specifics of the plan.
There are many practical applications for health reimbursement arrangements. If an employer wants to provide funds to reimburse for expenses applied to a deductible, for example, an HRA is a great way to do that. Or, they can offer an HRA in place of a traditional dental or vision insurance plan. HRAs can be designed to cover a wide range or a very narrow selection of medical expenses as set forth by the employer.
Because the parameters of the HRA are specified by the employer, they’re able to control costs to some degree. The contributions made to the HRA are tax-deductible, which translates to savings. Additionally, employers may find that offering an HRA instead of other benefits could save money because only those who actually have expenses will use the money. There’s also less risk to an employer than putting funds into an HSA.
Is a health reimbursement arrangement a good fit for your business or organization? Contact us for more information.