To Card or Not to Card? Advantages and disadvantages of a carded HRA

When establishing a health reimbursement arrangement (HRA) plan for an employer, benefits administrators must weigh the pros and cons of different payment models. It’s true that un-carded provider-pay or auto-pay HRA models, enabled by claims integration, can be a very attractive plan option. They offer an easy and low-noise consumer experience.

However, un-carded HRAs also miss out on an important opportunity to foster more cost-conscious consumer behavior. Further, a card brings a number of capabilities that, in many cases, make it the better option.

So is carding right for you and your employers? Here, we break down some of the main advantages and disadvantages of carded HRAs to help you make an informed decision based on the needs of each client.

Advantages of a carded HRA

Conscious decision-making: When a consumer is presented with a balance due, pulling out a debit card to facilitate payment is a highly conscious move. It’s a non-verbal acknowledgement saying, “I’m going to pay for these goods or services, in this amount, using this form of payment.” The card swipe at the point of purchase creates a much higher level of awareness than having a claim auto-paid (without ever reviewing the price).

Streamlined process: Some administrators fear that debit cards may often get declined, creating unnecessary noise. But in reality, 90% of debit card transactions are approved in real time. This rate can be even higher when cards are aligned to optimal plan designs. Most typically, the card simplifies the reimbursement process, reducing administrative burden for both employees and employers. Employees can use the card directly at their healthcare provider’s office, making it fast and convenient to access funds.

Improved employee experience: With real-time access to funds through the card, employees may feel more satisfied with their health benefits package. This, in turn, is likely to enhance their overall perception of their employer and improve employee satisfaction and retention. The card also eliminates the need for upfront personal payments (as in a more traditional HRA), which can be a significant financial burden for some individuals.

Better utilization of funds: The carded HRA can encourage employees to use their allotted funds for eligible healthcare expenses promptly. This can result in better utilization of the HRA, ensuring that the employer’s investment in the benefit is put to good use. Further, card transactions are usually tracked electronically. This provides better visibility into HRA fund usage and spending patterns.

Encourages preventative care: When employees have a card that covers eligible medical expenses, they may be more likely to seek preventative care and address health concerns early on. In the long term, this can lead to a healthier and more productive workforce.


Disadvantages of a carded HRA

Administrative complexity: While the card simplifies the reimbursement process, there is still administrative overhead involved in managing the HRA program. Time and effort go into setting up the card system, ensuring security measures, and dealing with any issues related to card usage. For this reason, it behooves administrators to work with a knowledgeable solutions provider. Alegeus not only brings expertise in plan design and implementation, but also the technological capability to manage large and complex employer plans.

Cost considerations: Implementing a carded HRA may come with additional costs. These could include fees for the card program, administrative fees, and any expenses related to addressing misuse or fraudulent transactions.

Limited availability: The availability of carded HRAs may vary depending on the size of the company, the insurance provider, and the specific plan offered.


Overall, a carded HRA can offer convenience and potential benefits for both employees and employers. Moreover, it can be an impactful stepping stone toward the adoption of programs that pair a high-deductible health plan (HDHP) with a health savings account (HSA) – and all the long-term savings possibilities they bring.

So it’s essential to carefully weigh the pros and cons to determine if a carded HRA aligns with a company’s objectives and employee needs. Implementing appropriate controls and educating employees on the proper use of the card can go a long way toward mitigating challenges – and can tip the balance in favor of a carded solution.


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