NEW YORK, Sept. 28, 2018 /PRNewswire/ -- HRA administration company, Clarity Benefit Solutions, discusses HRA enrollment trends to consider.
Health Reimbursement Arrangements (HRAs) are employer-funded and offer tax advantages for both employers and employees. HRAs work by reimbursing employees for out-of-pocket medical expenses and health insurance premiums.
HRAs are on the rise, as they make High Deductible Health Plans (HDHPs) more attractive to employees. However, until recently, small businesses would incur tax penalties if they offered HRAs to their employees. That changed when The Cures Act, which was recently signed into law, allows small employers to establish HRAs for their employees. As a result, qualified small employer HRAs (QSEHRAs) were established. QSEHRAS can be used to pay for non-group plan health insurance premiums, in addition to other employer- and IRS-approved expenses. Since this reform, HRA participation has increased across the board—most notably with smaller employers (two to 100 employees) and large employers (5,000-plus employees), as well as businesses who previously showed small enrollment numbers.
HRA enrollment numbers are expected to continue to rise, as these plans appear to have the least impact on the Cadillac Tax, which refers to employer-sponsored health benefits whose value exceeds legally specified thresholds will be subject to a 40 percent excise tax. Set to start in 2020, this tax will be levied on insurance companies, but the burden will most likely fall on employees and limit the tax preference for employer-sponsored health insurance. Actual claims versus potential claims paid from HRAs are anticipated to be used in the calculations, if the Cadillac Act goes into effect.
Since health care costs are projected to continue to rise, employers will continue to use cost-saving tools such as HRAs in order to provide affordable benefits to their employees. HRAs make it easier for employees to afford the higher out-of-pocket expenses that accompany higher deductible and lower premium health insurance plans.
Because HRAs are company owned and do not move with the employee when he or she changes jobs, many companies are using HRAs as an employee-retention tool.
About Clarity Benefit Solutions: Clarity Benefit Solutions provides technology that makes the health insurance plan selection process fast, easy, and straightforward. For over two decades, we have provided clients with industry-leading technology, compliance, and exceptional customer service. Our offering is designed to save time and lower the costs of managing benefits while also promoting employee self-service and automated ACA compliance.
SOURCE Clarity Benefit Solutions