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Understanding HRAs

Health Reimbursement Accounts (HRAs)

Here are a few key points: 

• Only the employer can fund an HRA.
• The employer owns and controls the HRA, which is a notational account.
• The employer decides what expenses HRA funds can be used for and whether unused balances roll over from year to year.
• HRAs are usually combined with an insured high deductible health plan whereby the employer a) saves premium and b) uses the savings to reimburse employees for some of that higher deductible expense.
• An administrator is usually hired to handle the HRA reimbursement process for claims below the insured deductible.
• Typically, total employee claims below the deductible do not exceed 30% of the employer's total deductible liability for the group. 
• Employees will be required to send their carrier's Explanation of Benefits form (EOB) to the administrator to request reimbursement of deductible expense.

Advantage: HRAs enable employers with insured health plans to save significant premium by buying a higher deductible plan and self funding claims below the deductible.  The premium savings is generally much higher than what the employer pays out in deductible reimbursement costs.