What is a Healthcare Reimbursement Arrangement?

An HRA is an arrangement that employers set up and completely funds to cover certain out of pocket, co-pays, co-insurance, and/or deductible expenses employees may incur associated with their health insurance plan. It is an arrangement whereby employers promise to pay certain expenses on behalf of the employee to help reduce their cost of medical expenses, for themselves, their spouse, and dependent children. This arrangement is 100% paid for, funded, and designed by the employer for the employee’s benefit.

Why would a company consider an HRA plan?

Companies consider implementing HRA as a way to reduce the cost of health insurance premiums. By increasing the deductible of the health insurance plan, the premium to purchase the coverage can be reduced considerably.

How does an HRA work?

HRA’s are designed to work in conjunction with a high co-pay, high co-insurance, or high deductible health plan offered by the employer. Traditional health insurance plans have low co-pays, low co-insurance, and/or low deductibles, but because the health insurance rates and medical expenses continue to rise, employers are deciding to design and implement HRAs to reduce employees’ costs. By increasing the co-pay, co-insurance, and/or deductible, the cost of your health insurance premiums will decrease, but an employee’s out-of-pocket costs may increase. This is why employers implement an HRA to help employees reduce their potential out-of-pocket expenses while still providing them with a health insurance policy that offers complete coverage. HRA’s are effective in managing employees’ expenses, but they will be required to submit receipts or understand how to get reimbursed for an eligible expense covered by the HRA.

How does the deductible get paid?

There are several ways an employee can get reimbursed from the HRA depending on the options an employer allows. To the right are examples of how to get reimbursed.

Many insurance companies will provide the claims data directly to HRC so employees will not have to submit to HRC for reimbursement. This will allow HRC to process and pay the claim directly back to the employee without them ever having to submit any paperwork to us for reimbursement. After the claim has been processed, the funds will be disbursed in accordance to the methods as outlined by your plan.

An employee can submit a claim online, mail it, fax it, or drop the claim off to us along with the proper documentation necessary to prove they have incurred the expense. Proper documentation may consist of a letter that they will receive from the health insurance company. This letter is called a letter of explanation of benefits (EOB). In some cases, a receipt from the pharmacy may be all they need to submit. The proper documentation will be outlined by the employer.

An employer may authorize the use of claims submission through the use of a Visa card. If an employer authorizes this form of reimbursement, an employee will receive a Visa card from HRC after they are enrolled. To use the Visa card, an employee simply presents it at an eligible location for an eligible expense. They may only use this card for eligible expenses and they must keep receipts, they may be contacted to verify the expense.

Should an employer outsource the administration?

There are many factors to consider when deciding to outsource the administration of paying the deductibles. Though pricing is important, it isn’t the only consideration to focus on. The employees will be submitting their claims for deductible reimbursement, and all of their personal information about what they had done will be on the EOB. Many employees will find this information private and may not want it shared with their employers. By outsourcing, the employer can get the claims paid, and the employee can rest assured that their information is kept confidential. It is also important to consider a Third Party Administrator who is set up for paying these types of claims. Employees are going to need an efficient streamlined process to receive their deductible money. Failure to reimburse an employee expediently could result in the employee receiving additional charges from their provider. Employers should consider using a TPA that can offer debit card processing for reimbursing the deductible. This would allow the employee to pay for their deductibles directly to the provider without having to submit claims for reimbursement.