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HRA vs HSA – Health Reimbursement Arrangement Vs Health Savings Account

March 5, 2012 By Mike Sheeran

Smart business owners who are looking to save money will quickly be rushed into the world of HRA’s and HSA’s (Health Reimbursement Arrangements and Health Savings Accounts). The two can a bit confusing at first so I’d like to discuss the differences between the two.

In this article, I’ll discuss what a HRA and an HSA are, how they are are used and how they can help save you or your business some premium dollars.

HRA Vs HSA

HRA Definition: An HRA is plan that is set up under IRS code section 105H and is established for the purpose of reimubursing employees for qualified medical expenses.

HRA’s are employer funded only
Money can be rolled over year to year if the employer chooses
Funds deposited and dispursed are tax deductible to the business and tax free for the employee
No limit on how much can be reimbursed
Any qualified medical expense can be reimbursed

HSA Definition: An HSA is often used in two different contexts. The first is the actual savings account and the second is referring to the health plan you are to be covered under.

HSA Savings Account – this an account that can be funded by an employer or employee for the purpose of paying for medical expenses.
Limits on how much money can be put into the account each year.
Money rolls over year to year.
Funds are completely employee owned
Can be used to pay for any qualified medical expense on a tax free basis
Must be covered by a HSA Qualified Health plan to make deposits into the savings account.
You can read more about HSA Rules for 2012 here.

HRA VS HSA In the real world

When I am working with new and renewing groups, using one of these great strategies is usually first in my list of options. Each one has their pros and cons so lets look at how each one would work for a company.

ACME LLC – has a 100% HMO where the employer pays 100% of the premium and they just a got another 20% increase. They are comparing an HRA vs an HSA to save money. They have decided on purchasing a HSA qualified health plan but now need to pick the funding arrangement.

The company will be saving about 40% in premiums using the high deductible health plan and don’t want employees to have any large medical bills.

Option 1: HRA – The employer has decided to refund employees their full medical deductible. As employees use the plan, the employer will reimburse them dollar for dollar up to the set limit. Any unused money is retained by the employer

Option 2: HSA – The employer does not want to bother with claims and wants to give the employees money to pay for their claims. The employer makes monthly deposits into each employees Health Savings Account until he has paid an amount equal to their medical deductible.

Under Option 1, the employer has the chance for much greater savings but there is a little more work involved in reimburseing everyone. Option 2 is a bit easier and more flexible, but once the money is given to the employee, it is gone. If an employee quits, they keep the money.

If you own a business and are weighing HRA vs an HSA, please call me for a health insurance quote or to hear how these strategies can help with your bottom line.

High Deductible Health Plan Pros and Cons

March 5, 2012 By Mike Sheeran

Insurance companies in NJ have been raising their premium rates tremendously over the las few years, so many small business and employees are considering the switch to a high deductible health plan. It is important to evaluate all of the different options and to weigh the pros and cons of having a high deductible health plan so you can make the best choice for your family.

Before I get started into the pros and cons of having a high deductible health plan, lets make sure everyone is talking about the same thing. In this case, a high deductible plan, HDHP for short is a plan that has a higher deductible than most other plans and also has a out of pocket dollar maximum that a participant may have to pay throughout the year. So one example may be a plan with a $2500 single deductible and a $5,000 maximum out of pocket. These plans are usually HSA Qualified but that is not necessary for the purpose of this post.

High Deductible Health Plan Pros and Cons

High Deductible Health Plan Pros

Significantly lower health insurance premiums. In some cases, companies and individuals can slash their premiums by as much as 50% by changing to a high deductible health plan.
Self funded employers will see much lower claims usage when moving from a rich plan design to a higher deductible option. Lower claims equals lower renewal and more savings.
Employees also benefit with lower renewal rates because the price increases won’t be passed to them in the form of higher payroll deductions.
If the high deductible health plan is HSA Qualified, there are significant tax advantages. Also see ( HSA Rules for 2012)
For employees leaving the company, another pro of a high deductible plan will be lower COBRA premiums. Don’t forget that when you leave, you now are paying 102% of the full monthly insurance premium.

High Deductible Health Plan Cons

High Deductible in the beginning of the year. This is obvious, but worth mentioning. If you have any scheduled visits shortly after enrolling in new plan, you must be prepared to pay much larger fee for your service.
High deductible at the end of the calendar year. Most plans run calendar year so if you start the high deductible plan in November, the deductible will reset in January. You now have the potentional to pay the full deductible in November and December only to have it reset in a January.
More paperwork. Since you are now paying instead of the insurance company, expect to be getting a lot of different bills. Luckily the larger claims aren’t that frequent, so your paperwork should be fairly limited.
Will you avoid care? Even when the premium savings are there, some people will outright avoid proper medical care for fear of the potential bill. I can certainly understand this but you should focus on the total maximum out of pocket and consider the worst case scenario. My personal plan had a $5,000 maximum out of pocket. I knew that under the worst case scenario, I would be paying about $400 per month if I manage to max the plan out. Not too bad if I had a $1,000,000 claim.

Now that we reviewed some of the pros and cons of a high deductible health plan, lets look at how to evaluate options.

How to evaluate different high deductible health plan options

Step 1 – get the monthly premium for the different plan options and convert them to annual

Step 2 – add the annual maximum out of pocket for each of the plans to the annual premiums

Step 3 – evaluate

Example:

Plan 1 Annual Premium is $5,000 with a $5,000 maximum out of pocket.

Plan 2 Annual Premium is $9,000 with a $3,000 maximum out of pocket

Plan 3 Annual premium is $13,000 with everything covered 100%

In this example you have the potential to pay up to $10,000 in plan 1, up to $12,000 in plan 2 or a guaranteed $13,000 in Plan 3. So despite having a higher deductible, plan 1 would be the best choice in my opinion. The other benefit is that if you don’t use the plan at all, you have the potential to save $8,000 in premium compared to plan 3.

If you have any questions on evaluating the pros and cons of a high deductible health plan, please contact Mike Sheeran for more information.

Affordable Health Insurance For College Students – Your One Stop Guide to Health Insurance Options

February 21, 2012 By Mike Sheeran

Are you a college student and need health insurance or are looking at all of your options for coverage while in college?

If so, I put together resource links for you so that you can get the best possible coverage for the lowest possible price.

Health Insurance for College Students

Health Insurance for College Students Option 1: Dependent to 26 Coverage

What is it?

The dependent to 26 law was enacted in March of 2010 and allows all children to stay on their parents health insurance plan up until the age of 26.

How much does it cost?

If you your parents already are paying for a parent/child or family health insurance contract, there will be no change in premium for them. If they are single or two adults now and need to add you, then they will pay an increase in premium.

Benefits

It is seamless health insurance coverage for college students and many times the parents do not have to pay an increased health insurance premium.

Additional Resources

United States Department of Labor

New Jersey Department of Banking and Insurance

Health Insurance for College Students Option 2: Dependent to 31 Coverage – DU 31

What is it?

Dependent to 31 coverage permits young adults to continue being covered by health insurance up until age 31. These benefits can kick in after the adult ages out of the Dependent to 26 plan. There are some eligibility restrictions so check out the resource pages below for all of the information.

How much does it cost?

This health insurance for college students is priced at a reduced rate compared the group plan. In many cases, you will pay about 30% less that what a single employee would pay on the group. You will be billed directly to your home and while you are still technically part of your parent’s group plan, you don’t show up on their statement.

Benefits

You can stay on the plan until age 31 and get a 30% discount on the insurance.

Additional Resources

New Jersey DOBI Coverage for Young Adults up to Age 31

Health Insurance for College Students Option 3: COBRA and NJ Continuation of Health Insurance Coverage

What is it?

For college students needing health insurance coverage that have exhausted options one and two, you still have the option of continuation of coverage through state and government programs. In most cases, you can continue your health insurance plan for an additiotional 18 months and sometimes up to 36 months.

How much does it cost?

The premium will be dependent upon the single rate of whatever your previous health insurance cost before plus and additional 2%.

Benefits

You can keep your same policy for an additional period of time without making any changes.

Additional Resources

US Department of Labor – COBRA

New Jersey Continuation

Everything you Ever Wanted to Know about NJ Continuation Coverage

Health Insurance for College Students Option 4: Individual Health Insurance Coverage

What is it?

Individual coverage is offered through the state and there are approximately 8 plans available each from most carriers. The plans between the carriers are very similar and are offered on a guaranteed issue basis.

How much does it cost?

These are priced based on your age, sex location and can vary from las low as $200-$250 per month up to $600 per month based on the plan.

Benefits

These policies are guaranteed issue so you can purchase them regardless of your medical condition.

Additional Resources

Guide to Individual Health Insurance

New Jersey Individual Health Insurance Program Buyers Guide

Health Insurance for College Students Option 5: Insurance Through Your College

What is it?

Many colleges will have deals worked out through major insurance carriers to offer to their students. Each college will offer a different type of plan with varying benefits. Sometimes these plans are full insurance plans and other times they may offer limited benefits.

How much does it cost?

Prices will vary from plan to plan so check with your college.

Benefits

These polices are easy to obtain since they are through the school and may possibly be the least expensive premium option.

Additional Resources

Guide to Individual Health Insurance

New Jersey Individual Health Insurance Program Buyers Guide

Additional Resources

Healthcare.gov – Grads and Other Young Adults

Health Insurance Resources for Uninsured New Jersey Residents

Summary

College students have many options for getting or keeping health insurance while away at school and even when they return. Please examine each option carefully and compare the prices to the benefits being offered.

Affordable Dental Insurance from Horizon Blue Cross Blue Shield

August 17, 2011 By Mike Sheeran

If you are looking for affordable dental insurance in New Jersey, look no further. Horizon Blue Cross Blue Shield offers two dental insurance plans designed for individuals and families who don’t have the option to purchase dental insurance through their employer.

These aren’t premium plan options but. you will find your dental expenses to be much lower by utilizing these plans and the network compared to no insurance at all. Between the two options, the individual dental plan is a better choice but it is a little bit more money.

Affordable Dental Insurance from Horizon Blue Cross Blue Shield

Option 1: Horizon Dental Centurion

Cost:$60 per single or $84 per covered family.

The Horizon Centurion Dental Program is an affordable individual and group dental program. Horizon Centurion offers reduced fees to members when they obtain their eligible dental services from one of the participating dentists in our Horizon Dental PPO Network.

These dentists have agreed to accept less than normal fees for all eligible dental services. When members use these dentists they will only be required to pay the dentist the reduced fee and will not be balanced billed for charges above that amount. The Horizon Centurion Dental Program is the ideal way for members to obtain affordable dental care.

Horizon Dental Centurion Video

Get the Horizon Dental Centurion Application– PDF

Look Up Horizon Blue Cross Dental Directory

Option 2: Horizon Individual Dental Plan –

Cost $180 per person per year and an additional $68.40 for each dependent child

Horizon Individual Dental offers eligible preventive and basic services with no deductible or copayment. Other eligible major services are available at significantly reduced fees. Horizon Individual Dental uses the Horizon Dental Choice Network of participating dentists.

Get the Horizon Individual Dental Plan

Look Up Horizon Blue Cross Dental Directory

In case you are still on the fence on whether to purchase dental insurance or not, please read what Horizon Blue Cross has to say on the matter.

Did you know your dentist can spot serious health risks?

Routine dental visits can do more than keep your teeth clean. They also provide early detection of serious health risks like diabetes. Recent studies show that periodontal disease is one of the complications brought on by diabetes; a staggering one-third of people with diabetes have severe periodontal disease. And, if you have already been diagnosed with diabetes, periodontal disease can make it more difficult for you to control blood sugar levels.

Horizon Blue Cross Blue Shield of New Jersey strongly believes in working with our members to help them take control of their health. We have the ability to integrate medical and dental care to provide comprehensive solutions to your health care needs through our dental awareness programs. If you are a Horizon BCBSNJ member and have diabetes, you will receive valuable educational material highlighting the link between diabetes and good oral health.

We recognize the connection between good oral care and good overall health. If you have not seen your dentist recently, make an appointment right away.

Horizon Blue Cross Blue Shield: How to read your health insurance claims EOB.

August 15, 2011 By Mike Sheeran

As I mentioned in a previous post about health insurance claims, one of the first steps is to review the EOB. Horizon Blue Cross Blue Shield has put together a nice one page sheet to help members understand how their claims were processed.

EOB and Insurance Claims Notes From Horizon Blue Cross Blue Shield

Part of making the most of your health care coverage is understanding how your plan pays your claims and what your role is in that process. Horizon Blue Cross Blue Shield of New Jersey provides you with an important resource called an Explanation of Benefits (EOB) to do this.

The EOB is a document you will receive after you see a physician or other health care professional, at the time your claim is processed. On the EOB you will find claims and patient payment information for you and your covered family members on a single statement. The sample EOB below provides an overview of the information and what it means to you.

Horizon Blue Cross Blue Shield – How to Read EOB – PDF

If you are current client and need assistance, contact Mike Sheeran or your dedicated account consultant at Glenn Insurance. You may also contact Horizon Blue Cross Blue Shield directly below.

Contact Horizon Blue Cross Blue Shield

If you have questions about
how to read your EOB, call
Member Services at
1-800-355-BLUE (2583).

Disadvantages of Having A High Deductible Health Plan

August 12, 2011 By Mike Sheeran

In my opinion, high deductible health plans are one of the best options available to small businesses and individuals looking to save some premium dollars. They certainly aren’t perfect though so I will give you a an idea of what to expect before you take the plunge.

I have personally been covered by a high deductible health plan for the past three years. I have probably saved over $10,000 in premiums over those three years compared to having a premium plan option. Of the $10,000 I’ve saved, I have had about $6,000 in claims so I am still way ahead of the game. Knock on wood!

First off, what is a high deductible health plan?

For the purposes of this post, we are assuming it is a HSA qualified plan, so it will have a minimum single deductible of $1,200 and a minimum family deductible of $2,400.

These plans also have no first dollar coverage so you pay for all services, except for preventive care until you meet your deductible. After the deductible is met, you then pay according to the plan. It may be a fixed copayment for services, a cost sharing or a combination of the two.

On With The Disadvantages

Premium Savings – Before you go all in with an HSA/high deductible plan, you need to evaluate how much you are saving in premium for how much you are going to risk. If your particular plan has a $2,500 deductible and it is only $500 cheaper than a much better plan, it may not be a good buy. Your broker should be able to help with this analysis.
Upfront claims exposure – you do your homework and the HSA is the way to go with savings of $200 per month and a $2500 deductible. Sounds great right? Maybe not. If you have a large claim in the first month, you will have to pay for that service right away before you have had a chance to save the money. You may be able to get a payment plan from the hospital or provider, but it does provide another potential issue.
Claims Paperwork – you will be self administering a lot of your claims, so you must do your due diligence to make sure all claims are paid correctly and on time. With an HSA, your provider will bill the insurance carrier and then you pay based on the approved amounts.
Receipts – the IRS requires that you save all receipts in case you ever need to substantiate a purchase. Good bookkeeping is a must!
Short plan years – this goes along with the upfront claims exposure. Most health insurance plans have a calendar year deductible, so the first year can be tricky. If your plan has a $2500 deductible and starts in November, you could potentially pay out $2500 in December and then another $2500 in January.

Those are the main disadvantages that I have come across personally since I have had my HSA. As long as the premium savings are there, most of the issues aren’t that big of an issue and you just have be able to do proper bookkeeping. Once you get the hang of it, these plans are no more work than anything else.

If you can think of anything I may have missed, or that you have personally run into, please send me a note so I can update the list.