How to Choose Between HRAs & Group Health Insurance Plans

How to Choose Between HRAs & Group Health Insurance Plans

Businesses large and small are re-evaluating their company health insurance offerings right now. You, too, may be reviewing your options and finding the decision a hard one to make. You want to offer the best plans to your employees. But you also have to be mindful of your benefits budgets. And this year has been challenging to everyone’s bottom line.
There is a growing trend and popularity of health reimbursement arrangements (HRAs.) But are these benefits reimbursement platforms really better than traditional group health insurance? To explore the benefits, costs, and eligibility requirements for both sides of the insurance fence, we’re taking a closer look and highlighting what you need to know to make the best decision for your business.

The HRA Phenomenon

Health reimbursement arrangements are relatively new platforms designed to present more options to businesses looking to offer affordable health insurance to their employees. It’s been popular since its official launch this January, but the impacts of the pandemic have businesses of all sizes re-evaluating the HRA solution.

What is an HRA?
The health reimbursement arrangement, or HRA, is a tax-approved platform that operates like an employer-funded reimbursement account. It’s not a health insurance product. Instead, it’s an employer-owned platform that pays employees for eligible out-of-pocket medical or health-related expenses. Employees will have to enroll in a Marketplace health insurance plan to participate. And the business will set spending and reimbursement parameters, in conjunction with the ACA’s definitions of affordable care.

Different Types of HRA Plans
Enacted officially in January of this year, HRAs have become quite the phenomenon among a variety of business segments. There are several different versions of HRA options, making the reimbursement account model customizable based on the company’s size, requirements, and needs. One of the most popular insurance designs is the individual coverage HRA (ICHRA.) But there are also excepted benefit HRAs (EBHRAs,) qualified small employer HRAs (QSEHRAs,) integrated group health plan HRAs (GHP-HRAs,) and retiree-based HRAs.

Benefits to Businesses and Employees
Businesses are flocking to adopt the HRA models because they’re extremely cost-effective. When benefits budgets are tight, the HRA offers a way for a company to predict and pay direct employee expenses. And since companies own the accounts and fund them entirely, there is flexibility for the company to establish processes, guidelines, and reimbursement eligibility requirements.

Employees appreciate the HRA models because they’re affordable and flexible at their level of engagement as well. Many HRAs allow for reimbursements of monthly health insurance premiums, along with out-of-pocket expenses associated with doctor visits, scans, and medications. Employees pay for their health insurance coverage and care and can then submit for direct reimbursement of many of these expenses.

What’s New with Traditional Group Health Insurance?

Traditional group health insurance certainly isn’t a broken model and continues to be the best option for many companies. And while you may already be comfortable with how the group plans work at the business and employee levels, there are a few things to consider when comparing these options with available HRA options.

How Traditional Group Plans Work
Traditional group health insurance plans are pretty straightforward in their design. Employers enroll in a group plan as a company and, in turn, offer a selection of benefits to their staff. Based on what the business is offering, employees can then choose to opt into the company plan, based on a minimum essential coverage benchmark.

Group Health Insurance Trends
There is some indication that health insurance premiums and costs are on the rise. Marginal increases can be expected in some plans, based on inflation and cost of living increases. But this year, the pandemic has brought a host of anticipated healthcare needs for the months ahead, and insurance companies are preparing now. Some data suggests there could be increased insurance expenses in anticipation of vaccine development and administration. Those patients who have been exposed to COVID-19 might present long-term care concerns. And the word is still out on the virus becoming a pre-existing condition.

Benefits of Staying with the Familiar
Companies find benefits in sticking with what they know. With SHOP coverage, there is no contribution requirement. But companies know to qualify for the Small Business Health Care Tax Credit, they have to contribute 50% or more to cover the premium costs for full-time employees. And enrollment options generally remain available throughout the year. If the costs aren’t expected to change much, and employees are happy with their group health insurance benefits, there may not be a need to change things for 2021.

How You Can Decide What’s Best for Your Business

As you weigh the health insurance options for your business, there are three key areas to consider first.

Verify Eligibility Requirements
Before you can decide if an HRA or the more traditional group health insurance option is best, you’ll need to verify the eligibility requirements. Some HRAs are based on the size of the company or the number of employees preparing for participation. And to leverage the group health insurance tax benefits, you’ll need to calculate your company contribution to premiums.

Take a Hard Look at Your Benefits Budget & Costs
You may decide that what you invest in employee health insurance benefits needs to be adjusted from previous years. Sit down with your budgets and use those to guide you to the most ideal solution. If you need flexibility and control of expenses, for example, the HRA platforms offer significant benefits to meet those needs.

What Your Employees Need
Don’t be afraid to connect with your staff and team members for feedback. Ask your employees what they prefer and need with health insurance options. What benefits matter most to them? You can take these responses into consideration when you make the decision to move forward. Any new plans you adopt will need to be explained to your employees. And you should be prepared to put a process in place to shepherd everyone through any new timelines and options.

While we can’t make the HRA or group health decision for you, we can certainly offer guidance as you navigate the Marketplace for options. Contact us for more information about how both can be ideal health insurance solutions.

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