HRA – Health Reimbursement Arrangements
There are two forms of HRAs – those for small businesses (1-3 employees) classified as either sole proprietors, partnerships or C or S Corporations, and those of larger employer groups. Designs for each are driven mainly by size and relationships (employee classifications), with the tax and other cost savings aspects of both being their driving force.
Small business owners can deduct up to 100% of their family’s qualifying medical expenses as a business deduction**.
For all other businesses reimbursements are not taxable to the employee and are 100% deductible by the employer.
The key is that employers of all sizes can take an underlying health plan and raise the deductible and out of pocket expenses to lower its’ premium costs, and pick up the uncovered liabilities through a tax free reimbursement, with or without a limiting cap.
Claims that exceed high deductibles tend to occur on a very limited number of persons within a group, therefore the savings in premiums achieved by raising the health plans deductible is typically much greater than any paid out reimbursements.
Further, the underlying health plan need not be an HSA, and the employer has the option of carrying forward any unused reimbursement alotments.
Deductible Expenses Include:
Health and dental insurance premiums
Vision care and eyeglasses
Doctor office visits
Deductibles and co-payments
Long Term Care Insurance Premiums
Larger Group HRAs, in particular, help employers cut health care costs by giving more responsibility to employees regarding the management of their health expenses. An HRA allows the employer to reimburse his/her employees for medical expenses such as co-pays, deductibles, eye care, dental care, and over-the-counter medications that are not covered by their current health insurance. The HRA allows employees to experience minimal out-of-pocket health care expenses, regardless of their insurance plan or provider. In the end all parties benefit by more appropriate and cost effective health coverage structures.
Please contact us today for more information at: 1.800.482.5347.
[Insurance regulations may prohibit the reimbursement of health insurance premiums in your State. **Expenses only qualify for deduction if they exceed 7.5% of the adjusted gross income.]
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