Healthcare Reimbursement Plan or HRA are reimbursements offered by an employer to their employee for health expenses claims. They are an alternative traditional group healthcare plan.
Healthcare reimbursement plans are different because the employer covers health expenses by offering a certain allowance amount instead of choosing a “one-size-fits-all” group health insurance.
A healthcare reimbursement plan can provide an employee with an allowance for medical expenses that includes insurance premiums.
How Do They Work?
Healthcare reimbursement plans require some legal documentation to be constituted as a formal arrangement. They are also subject to complex federal regulations which need to be fulfilled such as:
- Eligibility criteria
- What medical procedure will be reimbursed
- How long the process will take
- The method of payment
- In case of dispute, what will be the plan of action?
Healthcare Reimbursement Plans Can Be Cashed Out?
No! You cannot cash out your healthcare reimbursement plan. These plans are like an agreement between you and your employer. The funds for your reimbursement are non-existent until you make a claim.
For example, if a certain year you had negligible medical expenses so the funds will roll over to the next year. Although the employer can increase the amount transferred from one year to another, they mostly keep it the same.
What Qualifies As A Reimbursement?
As an employer or an employee, you might be thinking about what might qualify for a reimbursement. The medical expenses that will qualify for reimbursement include yearly health checkups, prescription medicines, insulin, therapy sessions at psychiatrist/psychologist and other medical treatments. They can also be provided for paying insurance premiums.
On the other hand, the expenses that will not be approved for reimbursement include gym memberships, funeral services, non-prescription medication and other services deemed not necessary.
HRA or Reimbursement Plans VS Group Healthcare Plans
Depending on the size of your organisation you will have to choose between an HRA or a traditional group healthcare plan. The thing to keep in mind is that HRA offers more flexibility and requires a small business to spend less money to cover health expenses.
A group healthcare plan provides the same benefits to each employee. The employee has no choice but to spend through their pockets if a certain service is not covered. While a health reimbursement plan lets the employee choose their plan which will cover their medical expenses and get reimbursed by the employer.
HRA’s are also tax efficient because they come under reimbursement regulations. The amount provided to the employees is not considered in income tax so it also benefits the employee. Instead, the business can file for tax deductions when they payout reimbursements to their employees.
HRA’s are easier to plan and arrange because they do not require a high amount of money or budget, to begin with. They can be arranged for a business that has very few employees, unlike a group healthcare plan where 100s of employees must pool money.
If you are an SME looking for a health reimbursement plan suitable for your organization then you should check out Take Command Health HRA. They are providing you with healthcare plan solutions that are tailored to your requirements and making it easier for your business to provide health benefits.