Common Myths about HRAs, Busted
Published on September 7th, 2023
Health reimbursement arrangements (HRAs) have gained popularity in recent years as a flexible and tax-advantaged way for employers to provide healthcare benefits to their employees. However, despite their increasing prevalence, certain misconceptions have persisted. We identify and debunk some of the most common myths about HRAs to give you a framework for discussing this valuable benefit with your employers.
Myth 1: HRAs are the same as HSAs
One of the most prevalent myths about HRAs is that they are the same as health savings accounts (HSAs). While both HRAs and HSAs offer tax advantages for healthcare expenses, they have key differences. HRAs are employer-funded accounts that reimburse employees for qualified medical expenses, while HSAs are individual savings accounts that employees can contribute to themselves and invest. Unlike HSAs, HRAs are entirely funded by the employer, and the employee cannot make contributions.
Myth 2: HRAs are only for large corporations
Another common misconception is that HRAs are only suitable for large corporations with extensive benefits packages. In fact, HRAs are incredibly flexible and can be tailored to suit the needs of businesses of all sizes. Small- and medium-sized businesses can use HRAs to offer competitive healthcare benefits to their employees while maintaining control over costs.
Myth 3: HRAs Are expensive for employers
Some employers worry that implementing an HRA will be costly. However, HRAs can be designed with budget control in mind. Employers choose their contribution amount and can set caps on reimbursements. This allows them to offer benefits within their budget constraints while still providing valuable healthcare coverage to employees.
Myth 4: HRAs are too complex
While it’s true that HRA plan design can involve a lot of complexity, the experience can be made simple and positive for employers and employees. It’s crucial to work with a solutions provider whose software automates and streamlines administration while also making it easy for employees to submit claims and for employers to manage the program. Further, HRA payment models that incorporate a debit card can encourage smart consumer behavior and lead to better long-term outcomes.
Myth 5: HRAs are not a long-term solution
Another misconception is that HRAs are a short-term solution for healthcare benefits. HRAs can be a long-term and sustainable solution when properly managed. Employers can select to roll over unused funds from year to year, and employees can accumulate funds over time, providing a reliable source of healthcare support for the duration of their employment.
Health reimbursement arrangements (HRAs) are a versatile and valuable employee benefit that can benefit businesses of all sizes. By debunking these common myths, we hope to shed light on the advantages of HRAs and encourage employers to consider them as part of their employee benefits package. HRAs offer flexibility, cost-control potential, and tax advantages, making them a win-win for both employers and employees in the ever-evolving landscape of healthcare benefits.