Health Insurance Reimbursement
A health insurance reimbursement account, also called an HRA or a Section 125 plan. It is an alternative type of employer offered health care plan. HRAs are one of the most popular health care plans offered by employers. Some employers only offer an HRA, while other may provide them in addition to traditional insurance coverage.
Why Employers Like Them
Health insurance reimbursement accounts help to keep employer’s insurance costs low, while providing adequate health care coverage for employees. An HRA may be offered by an employer instead of health insurance or instead of a flexible spending account. Unlike a flexible spending account, HRAs are funded by the employer. Also with an HRA funds in the account are not forfeited if they are not used during a specified amount of time. Employers actually save money with an HRA because the funds put into the HRA are tax-deductible. Employers also have more control over employee spending on health care since employees are forced to be more careful using the funds than they would be with using traditional insurance.
Employers who want to continue using traditional health insurance can also benefit by adding a health insurance reimbursement account. Having an HRA means the employer can choose to get a high deductible insurance, which saves them money, while allowing employees to use the HRA funds to pay for the deductible. It is a win-win for employees and employers.
Why Employees Like Them
Employees like health insurance reimbursement accounts because they are not losing out on health insurance as their employer tries to save money. An employee can use the HRA to save money on their health care needs too. Plus there is more freedom with an HRA than with traditional insurance coverage.
With an HRA there are not a lot of limits. An employee can choose what doctors they want to see and what types of care they wish to receive. They are basically free from the restrictions that usually come with managed care health plans.
Important Points
Health insurance reimbursement accounts are something that will probably continue to be used and become more widely used by employers. As this happens it is a good idea for employees to become more familiar with these accounts and how they work.
An important thing to note about HRAs is that the money in this type of account can’t be used for just any purpose. HRAs can only be used to pay for approved, health care related expenses. This usually includes deductibles, co-pays and other medical services. The use of HRA funds is mandated by the IRS, so it is important to follow the rules on using an HRA carefully.
Health insurance reimbursement account funds are used to reimburse employees. This means that if you have an HRA that you pay costs upfront and your employer will reimburse you from the HRA. Your employer will determine the specifics of how the account is to be used and how funds are distributed.
HRAs are becoming very popular are helping employers to be able to continue to offer employees reasonable health insurance coverage. For many companies, the use of HRAs has enabled them to continue offering health care despite the rising costs. Without the option of HRAs many employers would not be able to offer health care coverage.
