Review Your Health Reimbursement Arrangement | Best plans for 2019

It’s important to review your Health Reimbursement Arrangement plan document for continued compliance with IRS rules relating to the Affordable Care Act. Core Documents has all the information and materials you need to update or establish your HRA plan documents for the coming year.

How do HRAs work?

An HRA must be integrated with a group health plan. An HRA is integrated with group health plan coverage if it meets the following requirements:

• The employer offers ACA-compliant¹ group health plan coverage² alongside the HRA.

• HRA participation is limited to employees enrolled in the employer-sponsored group health plan coverage.

• Employees have the opportunity to opt out of the HRA annually and upon termination of employment.

• Reimbursements³ are limited to copayments, coinsurance, deductibles and medical care expenses that aren’t essential health benefits.

¹These plans cover the ACA’s list of 10 essential health benefits with no lifetime or annual limits.

²Employeers with fewer than 50 employees are eligible for the QSE-HRA which does not require integration with an employer-sponsored group health plan and can reimburse employees for the cost of premiums for individual health coverage.

³Other than the QSE-HRA or an HRA for One-Employee/Spouse, an employer may not reimburse an employee for the cost of premiums for individual health coverage.

Why review your Health Reimbursement Arrangement plan document now?

The plan document for an HRA plan describes and explains the plan design, features, obligations, and rights as required by the IRS, ACA, and DOL. All of that is provided according to tax, health care, and ERISA laws in effect at the time.

When there is a change in your HRA plan or the laws governing it, the plan document must be updated to reflect these changes.

If you are a Core Documents client, we will let you know when there is a change in the law requiring an update to your plan document, and you will advise us when there is a change in your plan.

Even when neither of those calls for a plan document update, most employers routinely update an HRA plan document at least every five years, while best practice is every two years.

4 Popular HRA Plan Design Options

As you review your Health Reimbursement Arrangement plan document for dates and changes in your plan, you might want to review how well the current plan is working for you and your employees.

Plan design options for an HRA are nearly endless. After years of working with clients, Core Documents has found these four plan designs to be the most popular:

1) Deductible Gap HRA Plan

The Deductible Gap HRA Plan is designed to be combined with a high-deductible health insurance plan and will only pay for items covered by the group insurance policy that it accompanies.

For example, employees are accustomed to having a $500 annual deductible with their group health plan. The employer wants to lower health plan premiums with a high-deductible health plan (HDHP) with a $2,500 annual deductible but does not want to impact employees negatively.

This employer meets this goal by buying a high-deductible insurance plan with a $2500 annual deductible at a considerable savings and sets up a Deductible Gap HRA to cover, well, the gap between the old and new deductibles. The employees continue to pay only $500 of annual deductible expenses, and the Deductible Gap HRA reimburses employees for deductible expenses from $501 to $2,500 of the new deductible.

On average, only 20% of employees will have a deductible expense in the gap range, and only those with that expense are reimbursed. The HRA is not designed to cover any other expense.

An employer is usually much better off covering the deductible this way than by paying higher premiums to keep the up-front deductible low for everyone.

2)  Comprehensive HRA Plan

The Comprehensive HRA Plan is a viable option if combined with an employer-sponsored group health plan (including employees participating in a spouse group health plan). It can be used to reimburse most 213(d) medically-necessary out-of-pocket expenses, including excepted benefit insurance premium expenses.

Through this HRA plan design, employers may provide employees with a set amount of dollars every year or every month to spend on allowed expenses. Unused HRA account balances can be rolled over from one Plan Year to the next so that funds can accumulate over the lifespan of the plan.

Employees who are not enrolled in an eligible employer-sponsored group health plan can still use the Comprehensive HRA Plan for dental, vision, and excepted benefit insurance premium expenses.

3) Limited HRA Plan

A Limited HRA Plan design is the most versatile since design options are nearly unlimited. It allows employers to cut premiums and ensure the difference themselves.

Employers who find ways to reduce group health premiums by adding extra deductibles or co-payments can establish an HRA to pay those expenses (if they occur) with the Limited HRA.

Limited HRAs can also be restricted to just one type of medical expense, such as prescription drugs, dental, vision, or other types of insurance.

4) Premium Reimbursement Arrangement (PRA) Plans

The PRA Plan allows employers to reimburse insurance premiums for dental insurance, vision insurance, ancillary insurance, certain cancer and indemnity plans, long-term care insurance, and other excepted benefits.

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The Trusted Source of Affordable Benefit Plan Documents for over 20 Years.

Core Documents is the country’s leading provider of cost-effective, tax-saving benefit plan documents for Section 125 Cafeteria plans and Health Reimbursement Arrangements. The Trusted Source since 1997, thousands of satisfied agents and employer groups nationwide rely upon Core Documents for free plan design consulting services, plan document updates, ERISA Wrap SPDs, and administration services.

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