Blog — Page 10 — NJ Insurance Plans

Health Reimbursement Accounts are another tool that most businesses can use to save up to 20-30% on their health insurance expenses.

In most cases, the HRA will involve two parts, a high deductible health plan and an employer owned and funded reimbursement account. Instead of purchasing a “premium” health insurance plan each year, the employer will purchase a more affordable high deductible plan and use the savings to reimburse employees for certain medical related expenses.

Premiums Savings

Depending on the current plan design, and the new offering, the premium savings can be up to 50%. (Greatest savings are seen when moving from a 100% plan to high deductible plan such as an HSA Qualified insurance plan)

Reimbursement

Employers can set reimbursement levels at their discretion as long as it does not discriminate between employees. A common technique is for the employer to fund the hospital deductible for single employees and families.

Any unused monies that has been set aside by the employer are retained by the employer year to year.

Employees are either reimbursed by submitting claim forms, or they are issued a debit card that allows direct payment from the employer HRA fund.

Taxes

When properly set up, the HRA monies are tax deductible to the business and are received tax free to employees. There are a few key issues that must be addressed though. Because of this, I recommend using a third party administrator to assist.

The HRA is considered a health plan so proper plan documents must be in place and signed off on by key company personnel.
All reimbursements must be substantiated by receipts to show that they are approved health expenses. The expenses must also be listed in Section 213(d) of the IRS Code
The person administering the plan may not have hiring or firing rights at your company. In addition there needs to be a backup administrator in case the main administrator is out for any reason.
There are more issues that need to be addressed but you get the picture. —- get a proper administrator. I have several that are very good to work with.

HRA In Action – Based on a Real Case

Employer Side

Small business with 10 employees facing another 25% increase. The new annual premium was going to be $110,000. On the current plan, the employees had a $1,000 single deductible for hospital inpatient and families had a $2,000 deductible

In this company, the employer felt that most of the employees rarely used the coverage so that most of the premium was being wasted unnecessarily. I agreed and suggested a high deductible health plan coupled with a HRA. This way, the employer would only pay for claims as they are incurred and money wouldn’t be wasted on people that never used the insurance plan.

The new plan we chose had an upfront deductible of $2500 per single and $5,000 per family. The new annual premium for all employees is now $50,000.

Premium Savings = $60,000

With the premium savings of $60,000, the employer has agreed to fund everyone’s full deductible. Based on their census of employees, the employer could potentially pay out $50,000 if everyone uses 100% of the money they have been allotted. With that in mind, he will have a guaranteed savings of at least $10,000 and likely much more depending on claims.

At the end of the year, the employer will retain any unused money and can even roll it over if he chooses to. That way employees who have not used the plan, can increase their HRA balance for coming years.

Employee Side

Each employee has been given a debit card provided by the third party administrator to pay for medical expenses covered by the plan. When they visit their doctor, they present their insurance card and pay their bill with the debit card. The money will come from the employer’s account and the employee’s net cost is now $0.

The employee will continue on like this until he has spent all of the money that the employer has allotted. Employees will then pay for their claims out of their own pocket.

My Opinion

The HRA set-up should be considered by all employers and I welcome the opportunity to present it. The HRA has a few more requirements and some educational issues that need to be worked through but in the end, both employers and employees win. In my opinion, it is probably the best way to make small business health insurance more affordable for everyone.

If you have recently lost your health insurance coverage because you were laid-off or have quit, you have the option to continue your coverage via NJ Continuation or COBRA.

If the company you worked for had less than 20 employees for more than 50% of year in the previous calendar year, than you are eligible for NJ Continuation rather than COBRA.

Qualifying for NJ Continuation – a list of qualifying events

You must be terminated for a reason “other than for cause”
Your hours have been reduced to less than 25 per week, making you part-time.
Death of the employee – dependents may continue
Dependent child ages off plan – older than 26

Who is eligible to continue coverage?

Typically, anyone who was covered by the plan prior to the loss of coverage including all dependents.

How long may you continue your coverage?

Normal Termination: Up to 18 months
For death of primary card holder : Dependents may continue up to 36 months.
Divorce: Spouses that lose coverage through a divorce may continue up to 36 months.
Disability: Employees deemed disabled under the Social Security Act may continue up to 29 months.

Cost

Employees are responsible for 100% of the premium and employers may charge an additional 2% administrative fee. For disabled employees, employers may charge up to 150% of the premium.

When enrolling, the employee has up to 30 days to make first premium payment after notifying the employer they would like to continue the coverage.

When does the coverage end?

There are a few ways the coverage can end.

Employer terminates all the health plans offered.
Continuing subscriber requests termination
Subscriber fails to make timely premium payment
Subscriber exhausts the time allotted to continue(18,29 or 36 mos)

Notes For Employers

Employers must notify employees of their right to continue coverage but not required to notify dependents.
The employer cannot require the first premium payment be made immediately. Employee has up to 30 days to make first payment.

Notes for Employees

You must notify your prior employer you would like to continue coverage within 30 days of receiving your continuation paperwork.
You must make your first premium payment within 30 days of notifying that you will be continuing coverage.
Each month you must make a timely payment and not exceed your 30 day grace period payment window.
Premium payments should be made directly the employer and not to the carrier.

Additional Resources

If you have any questions regarding NJ Continuation please contact me directly and I will do my best to assist you.

Additional information from the State DOBI can be found here.