Risk & Business Magazine JGS Insurance Risk & Business Magazine Summer 2018 | Page 5

HRAs
BY: BARRY FIELDS,
VICE PRESIDENT OF EMPLOYEE
BENEFITS, JGS INSURANCE
Why HRAs Are Becoming More
Important Than Ever
B
etween rising healthcare costs
and healthcare reform efforts,
there’s no question the employee
benefits landscape is continually
changing — and keeping the
hands of benefits managers full.
With all these changes, employers need to
think creatively when it comes to building
and administering their health plans.
While consumer driven plans and health
reimbursement accounts are not new, they
are becoming much more commonplace
and their importance is now greater than
ever. HRAs, in particular can help employers
create a self-insurance plan for their
employees and maintain rich benefits.
HRAs help employees pay for medical
expenses before a deductible is met. They’re
essentially employer-funded group health
plans that reimburse employees for medical
expenses up to a certain dollar amount.
Employers fund and own the accounts —
which means they get to keep all savings and
any unused funds. HRAs can help employers
in a number of ways.
A FIRST STEP TOWARD SELF-INSURANCE
One of the many changes we have seen
over the past few years is a growth in the
self-insured marketplace. While in the past
self-insurance was only for the larger, cash-
rich employers, more and more mid-market
businesses are now looking into it in order
to cut costs and regain control of their
benefits.
For businesses that can’t self-fund, are not
yet ready to move to a self-insured plan or
are looking for a way to just dip their toe
in the water, HRAs ar e a great alternative
and option. HRAs allow businesses to
self-insure only a small portion of the
healthcare plan (copays, deductible,
pharmacy benefits, etc.) while still seeing
substantial savings and having access to
detailed claims information.
HOW HRAs WORK
Consider a 200-life group called “H-Corp.”
H-Corp offers rich benefit plans with $20
office and specialist copays and a $1,000
deductible. H-Corp pays $1,500,000
annually for their benefits.
The company decides it is spending too
much on healthcare and seeks a way to
offer the same benefits while lowering the
annual cost. H-Corp’s insurance broker
recommends a plan with a $50 copay and
a $3,000 deductible, which would reduce
their annual spend to by $500,000. In
order to keep the same benefits, H-Corp
implements an HRA to reimburse
employees for the difference in copays and
deductibles. Based on the last three years,
H Corp predicts their HRA claims to be
$100,000 to $150,000. Therefore, using an
HRA translates into a $350,000 savings for
the exact same benefit plan.
WHAT TO WATCH OUT FOR
There are some pitfalls in administering
an HRA. Because an HRA is a self-funded
plan layered over a fully insured plan
(rather than a reimbursement plan), all self-
insured guidelines apply. For example, self-
insured employers, as well as all insurance
issuers, must help fund the Patient-
Centered Outcomes Research Institute
by paying the PCORI fee. Employers
administering HRAs must also abide by
nondiscrimination rules. Most employers
work with a third-party administrator
to pay claims, handle fees and ensure
compliance.
It’s vital for employers to ensure HRAs
are being administered properly to avoid
penalties. But as health insurance costs
continue to rise, HRAs are becoming a
more popular way to control costs and
provide a level of benefits that employees
will appreciate. +
Barry Fields has over 26 years of employee
benefits experience advising clients in a
wide range of industries, professional and
industrial, public and private, throughout the
United States and worldwide.
Barry specializes in providing full-service
benefits consulting to clients including
program design, compliance, plan funding,
underwriting, wellness programs, employee
communications, benefits administration,
employee advocacy and the use of effective
strategies in benefits management.
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