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HRA to Cut Employer Healthcare Costs

Sep 23rd, 2012

HRA

Reducing the cost of health insurance is a great challenge for businesses. Employees look for jobs with great opportunities for growth and benefits that go along with it. Health insurance is one of those benefits. More than half of Americans get their health coverage through their employers.

Providing group health insurance for employees can be expensive for businesses. Employers want their workers to be healthy but at the same time they also want to get out of the “business” of providing health insurance for them.

One solution for businesses is through Health Reimbursement Arrangement (HRA). With HRAs, employers can reimburse their workers’ medical care cost instead of providing health coverage for them. They will no longer act as “middle men” between the health insurance providers and their workers.

Through HRAs, employees have the option of choosing a portable private medical coverage. This means they can enjoy health insurance coverage for life even if they are too sick to work, out of a job, or retire early.

Under HRAs, premiums will remain the same regardless of an illness, an injury, or job loss. Employees can purchase their own health insurance policies and have the freedom of choosing different options like high deductibles. They can also seek advice and work with an expert to get the best out of their money.

Employees can also use a Health Savings Account along with their HRAs to further reduce the cost of their coverage. Once employees are approved, they will have better, more reliable, and permanent coverage. They won’t have to rely on their jobs for their health insurance.

With HRAs established, employers will not be required to administer plans for their workers. They can avoid the confusion of shopping for plans every year. They can provide tax-free money directly to their employees for medical care expenses. They are now free from purchasing group plans for their businesses which can be over-priced and profit-draining. Businesses will save an average of fifty percent compared to their current group health insurance plans.

Any approved plan can be used for an HRA. However, most prefer high deductible plans for HSA compatibility. With permanent plans, those who have lost their jobs no longer have to get COBRA plans for continued coverage.

HRA is the first consumer-directed plan created by Congress designed to cover medical expenses of employees. Employers can channel their benefits through an HRA and pay for their workers’ health insurance. Employers are free to decide how much they will contribute. Furthermore, these contributions are tax-deductible for employers and tax-free for employees.

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