How Do Health Reimbursement Arrangements Work

With increasing health insurance premiums and decreasing health care benefits, the American people are becoming worried about what to do about health care and rightly so. It is becoming more and more difficult for employers to offer comprehensive health coverage to employees. Furthermore, with increasing cost, it is becoming more difficult for the employee to pay for their share of health care costs.

While the Obama administration promises to provide “universal health coverage,” this coverage does not come without cost, and the program implementations may be slow to enter the home of the every day American. In the meantime Americans need to understand that there are many other options available to them as opposed to the typical HMO (Health Management Organization) or PPO (Preferred Provider Organization) .

There is a new option available that can prove cost effective and beneficial to the employer as well as the employee. This is known as an HRA . An HRA is a Health Reimbursement Arrangement. This is essentially a tax-exempt medical savings account. Only employers are allowed to put money into the health reimbursement arrangement account. They often put money into the account as claims are entered. Often these Health Reimbursement Arrangements are linked to high-deductible health plans.

This means that the health insurance plan has a low premium that needs to be paid, but has a high deductible once insurance coverage is needed. Because over 2/3 of employees never actually meet their deductible costs, it is more beneficial to have an Health Reimbursement Arrangement (HRA) plan.

With this plan, employees pay less in insurance premiums. This savings that the employer receives from the health plan in turn allows them to put more money into Health Reimbursement Arrangements (HRA's) . In addition these plans often pay first dollar coverage. This means that the health reimbursement arrangement (HRA) account will often cover the whole cost of the whatever procedure is necessary, and therefore the individual does not have to pay any of their deductible.

These accounts work much like Flex Spending Accounts. However, unlike Flex spending accounts if the money in your health reimbursement arrangement account is not spent, you are able to roll it over from year to year. These arrangements may also be used to pay for medical costs once one has entered retirement.

Since these health reimbursement arrangements plans give more control over the health coverage to the employee, and they are solely based on employer contribution rather than something like employee salary reduction, these plans appear to be very popular amidst employees.

In addition dependents are also covered under the Health Reimbursement Arrangement. Many times this plan works to save the employee money. Since the arrangement works much like cash, often the hospitals realize that they are being paid cash and so you are likely to receive a discount on whatever procedure you are seeking to have done.

In addition because employers know how much there are putting into these accounts, they know exactly how much money they are spending on health care. It is a win-win situation! Health Reimbursement Arrangements are something that every company and employee should look into as far as health care possibilities are concerned. Invest in your life and save your wallet!