Why should you consider an HRA?
Employers use HRAs as a means to offset the extra costs they ask employees to incur when they switch to a cost-savings group medical plan. The HRA fills the financial gap employees would have had to fill otherwise. The result? Employees don’t see the change you make in their health benefits plan as a financial loss. Better still, once employees start using the HRA, they quickly learn the cause and effect of their health care choices; the wiser the choices, the more money stays in their account. They learn the true cost of health care by creating a long-term contribution strategy.
Employers determine their risk tolerance based on the amount they choose to provide to employees participating in the HRA plan for that year. An employer could see the maximum savings of 100% if HRA funds are not fully utilized by the covered employee. By processing the deductible amounts, using the IRS Section 105 (HRA), combined with the normal health plan carrier’s discount contract, will normally give the employee a 20% to 40% discount off the retail cost of medical services they would not typically experience.