A Better Way to Combat Rising Health Insurance Costs

Smart employers are providing their employees with a High Deductible HSA Qualified Health Insurance plan linked to a Health Reimbursement Arrangement (HRA).

The HRA converts the high deductible insurance plan into a low or no deductible coverage. Employers reimburse employee verified claims up to the deductible of the insurance plan.

This arrangement enables an employer to realize significant savings from the reduced insurance premiums. Employees are not faced with a large amount of money out of pocket should they needed services beyond Preventive Care (which is now included with the payment of premiums).

With an HRA, an employer authorizes amounts an employee will be reimbursed for medical services used. The employer uses the insurance policy deductible as a stop loss point.- He converts a High Deductible into a Low Deductible or No Deductible insurance plan with very limited risk.

An employer uses an HRA to save benefits for employees and can save significantly in overall costs.

The premium savings gained by choosing a high deductible in place of a low deductible plan will always provide more funds than an employer will need to reimburse claims. HRAs only pay for verified medical claims after they occur.

Insurance (a defined benefit product) must be paid in advance - benefit money that is not used stays with the insurance company..

One of the major reasons insurance is so expensive is that insurance companies use DEFINED BENEFIT products. There is little control over costs. Health insurance companies over time have created "deductibles," "co-pays," "participation," "insured share" and "life-time aggregate limits." They also limit their medical costs of services by contracting with Providers: physicians, hospitals and drug companies for discounts. Higher premiums directed at small groups and individuals have been another resource. Today health insurance premiums, rising at compound rates of 10% per year and more, have made Defined Benefit health insurance too expensive. A practical and inexpensive solution is to use an HRA.

Congress enacted DEFINED CONTRIBUTION (HRA) legislation years ago. It was reformed and improved in 2002. An HRA enables employers to define (limit) their reimbursements to an employee's qualified health-care expenses, receive a tax write-off and not have to report them as income to the employee.

Now under the new Health Care Law, employers are using HRAs to bring newly required "health benefits for all employees" into compliance with the requirements of the 2010 Patient Protection and Affordable Care Act (PPACA) and to bring their benefit costs down and under control.

The Health Care Act 2010 provides that unlimited PREVENTIVE CARE is delivered to insureds - no deductible can be imposed.

These tables show what insurance companies expect in usage per year per insured beyond Preventive Care.* 32% of insureds will spend nothing. 72% will spend less than $500. 81% will spend less than $1,000. 88% will spend less than $2,000.

* In other words the majority of employees will use few if any of their benefits beyond preventive care (Routine Exams, Well Child Care, Immunizations, Tobacco Cessation, and Health Education) in any given year. The new health care law instructs no deductible shall apply to preventive care. Preventive care is now paid for with the premiums. The effect is to make health insurance not just for sickness but for wellness also.

An HRA works because it allows employers to avoid expensive low- or no-deductible health insurance that causes them to pay in advance for insurance benefits that will mostly not be used.

Some employers also use an HRA to reimburse employees for Dental and Vision costs instead of buying additional insurance for those services.

Additional HRA Advantages to Employers and Employees

• Control. HRAs give the employer authority over reimbursement funds. Employers can choose the amount of health expenses to reimburse and can prorate reimbursements.
• Self-Insure. By selecting a high deductible insurance plan and linking to an HRA, you can dramatically cut the cost of providing healthcare benefits to your employees as required by the new Healthcare Reform Act.
• Financial Ease. HRAs don't require prefunding; an employer may simply reimburse plan participants for Plan eligible expenses as they occur. And with a myResource Card MasterCard credit card or mySource Card MasterCard debit card, you can speed up and simplify the reimbursement process..
• Savings. Everyone experiences a tax break when an HRA is used. Reimbursements through an HRA are tax deductible as a business expense for the employer and reduce FICA, and the reimbursements are tax-exempt for the employees. Employers and employees also enjoy the lower premiums that go with high-deductible health plans. And the negotiated network discounts are retained.
• Choice. There are no restrictions on the type of health plan that can be paired with an HRA. You and your employees may choose what you want. All insurance companies (HMOs and PPOs) offer high deductible plans. Employees get to decide where and when to spend their apportioned HRA funds. They are free to choose their healthcare providers and services and shop for best prices.

Why Sound Benefits?

We provide objective claims administration expertise within 24 hours.

Sound Benefits has the technology and expertise to make sure our clients are in compliance with the new Health Care regulations and the IRS requirements for using an HRA. From start (with plan documentation) to finish (24-hour administration), Sound Benefits provides oversight and support for your HRA. Hiring us is like hiring an administrative assistant for health care and benefit matters.

We custom design document and service packages to suit a wide variety of businesses and non-profit organizations. All Sound Benefits HRA Plan Document and Administration Packages include:

• HRA Plan Document - Plan Documents are individually prepared for each client and delivered in a binder notebook. The Plan Document is accepted and signed by an Owner/Sponsor of the Company and kept on file for review by employees.

• HRA Summary Plan Description (SPD) - is provided for each employee. It explains the plan's purpose, who is eligible, how to enroll, etc. in easy to read language. Also includes all information required by the Internal Revenue regarding the Plan Year start and end dates, Fed. ID#, and information regarding COBRA, FMLA, and required Department Of Labor information.

• Employee Guide, Election Agreement, and Claim Form - Personalized for the Company, it will include the Election Agreement and Claim Forms to submit for reimbursement of authorized benefits.

• HRA Administrative Handbook - Includes sections on: Administration, Non-Discrimination Testing, and Reporting and Disclosure information.
• Resolution to Adopt a Section 105 Plan Form - Form includes minutes of the meeting to adopt the Section 105 Plan as an employee benefit.

• Ongoing Advisory Services. We can guide you and your employees through the roll-out of your new HRA. You don't have to wait until the end of your plan year to make adjustments. Sound Benefits will review your plans with you regularly, and offer suggestions for keeping your costs under control.

• Online Administration. By using the myRSC.com website with your HRA, employers and employees can at any time review the status of their HRA, including employee enrollment and aggregate reporting of claims. Sound Benefits includes access to myRSC.com in our administrative fees.
• Now through July 31, 2012: Free setup of Administrative Services on request.

How To Start an HRA Plan

There is no requirement that you continue your over-priced insurance plan! You can start your HRA at any time. Fill out an application for an HRA plan by clicking here.

Questions and issues are sure to come to mind.. We would be pleased to talk with you and help in any way we can.