I am a huge proponent of using health reimbursement accounts(HRA’s) to lower the health insurance premiums. The concept has been around for a long time but they are recently becoming more mainstream, especially to small business owners, to help get health insurance and health care expenses under control.
***If you are unsure what an HRA is, please check out this post. Consumer Directed Healthcare 101: Health Reimbursement Accounts – HRA
If you are still unsure of whether an HRA is right for your business, consider these advantages:
***These are all assuming you have a properly set up health reimbursement arrangement per the tax code and law.
- You can choose exactly what health care expenses you will be reimbursing for. You can pay towards dental care, prescriptions only, hospital deductible only, glasses, etc….You, the employer, decides what will be paid for and how much.
- Contributions are tax deductible to the business
- Reimbursements to employees are received tax free
- Unused money can be rolled over year to year for employees
- Or – you don’t have to roll it over year to year – If you don’t want to
- When employees, leave, you retain the unused funds, unlike a health savings account
- You don’t have to pre-fund an actual account – you just pledge that you will reimburse for medical expenses and then pay as the claims come in.
- You set the limit on how much to reimburse each employee, so you know your maximum expense per year.
- Since all of the money pledged will likely not be used, you may be able to fund a higher amount than with an HSA.
- Employees don’t actually have to be covered by the health plan to participate in HRA
Ultimately, the great thing about using the health reimbursement arrangement is flexibility. It is the perfect way to enhance your plan and reimburse employees for chosen health related expenses. Most importantly, your savings can be up to 20-30% over a traditional health insurance program since you are only paying for claims as they are incurred and not giving all of your money to the insurance carrier up front.
If you would like more information on HRA’s or any of your health insurance needs, please contact me here.