3 Reasons Employers Should Offer Health Reimbursement Accounts in Addition to HSAs
Published on September 1st, 2016
Consumer-driven healthcare plans and accounts have undergone an evolution since they were first introduced with the rollout of the “first-born” FSA, then the Health Reimbursement Account (HRA) and finally to today’s flashier, attention-seeking sibling, the HSA or Health Savings Account. In many ways, HRAs are still behaving like the middle child they are. HSAs and FSAs seem to get all of the attention, and growth in HSAs continues to outpace HRAs, but the fact remains that HRAs have grown steadily along with HSAs and are predicted to continue to grow at a rate of 10-15% annually. This modest growth projection underscores the potential opportunity many plan administrators are leaving on the table by not fully helping employers understand reasons to consider HRAs in addition to HSAs.
Read on to find 3 reasons that make HRAs an attractive option for employers.
1. HRAs are flexible and feature-rich
Unlike HSAs, Health Reimbursement Accounts are controlled by the employer and meant to be used in conjunction with a firm’s health plan. As such, HRAs allow for flexibility in plan design. While this flexibility offers a rich experience, it also creates potentially daunting complexity for both employers and employees – one reason for its lower adoption rate. Plan administrators can help guide employers through the maze of options by consultatively helping them assess their highest plan priorities while not going overboard with too many customizations.
With so many options for creative plan designs often offered by brokers – such as embedded deductibles, claims crossover, coverage tiers and cost sharing – HRAs can become challenging to design and administer. While such creativity can seem like a boon for clients, it could actually be off-putting to prospects who can’t see a way to support their employees in such a plan.
Here are a few reasons why employers should consider HRAs with customizations:
- They want to keep their prescription plan separate from their medical plan
- They want to keep co-pays in their plan design
- They offer no-cost onsite healthcare clinics to employees
HRAs allow for these things with no IRS penalties.
2. HRAs can help employers concerned about cash flow
Employers with higher-than-average turnover may find HRAs even more attractive than HSAs. Where with an HSA an employee leaves with all the funds in the account – including those contributed by the employer – in an HRA, funds are returned to the employer. At the same time, healthcare funds contributed to either account are available for use by the employee on day one.
3. HRAs are the best option for retirement age employees
If an employer has a large population of Medicare-eligible employees, HRAs are a great choice – or at least should be offered in conjunction with HSAs, since those employees are ineligible to contribute to an HSA. Another nice feature of HRAs for retirement-aged employees is that they will still be able to rollover funds contributed into a retiree HRA.
Help simplify plans for employers and consumers
As employers increasingly remove themselves from direct involvement in employee healthcare coverage due to unsustainable cost increases, HRAs can be a powerful tool in the benefits toolbox, offering attractive value propositions that reduce costs for employers and improve employee engagement in their own health and wellbeing.
Plan administrators and brokers can help capture a share of the multi-million-dollar growth opportunity for HRAs by acting as a partner to help employers navigate options and make suggestions to best fit their unique needs.
Technology can also play a crucial role in improving adoption of HRAs – for both employers and consumers. Automation tools like those offered by Alegeus can help make the most complex plans manageable. Such a platform helps administrators build highly-configurable HRA plans, template-ize them for multiple clients, and also contains front-end tools to help consumers by bridging back-end account information and carrier data in easy-to-consume dashboard format.
HRAs are a versatile tool to enable employers to reduce healthcare costs, enhance benefit programs and improve employee satisfaction. HRAs represent a market opportunity that health plans and third party administrators cannot afford to ignore. By actively guiding employers through the complexities, you can increase your share of the ever-expanding healthcare account market.