By Andy Yost

Health reimbursement arrangements, sometimes referred to as HRAs, are distinct from HSAs or FSAs. As healthcare costs continue to rise, many employers are turning to HRAs as a strategic solution.

Here are the key points to understand:

Purpose of HRAs: HRAs are implemented by employers to address the escalating costs of healthcare. The strategy involves increasing deductible levels and having the employer reimburse a portion of the employee's deductible.

Types of Reimbursement Arrangements:

• Last Dollar Reimbursement: Employers reimburse the final portion of the employee's deductible. For instance, if the deductible is $5,000, the employer may reimburse the last $2,500.
• Sandwich Reimbursement: Employers fund the initial portion of the deductible, with employees covering the middle portion, and the employer reimbursing the final portion.

Utilization of TPAs: Some employers adopt sandwich reimbursement arrangements coupled with third-party administrators (TPAs) who manage funds and provide employees with preloaded credit cards for deductible expenses.

Introduction of ICHRA: Individual Coverage Health Reimbursement Arrangements (ICHRA) have emerged as a newer strategy. Employees procure coverage from the individual marketplace, and employers reimburse them for healthcare expenses.

Considerations for ICHRA: While ICHRAs offer flexibility, they require individuals to obtain coverage from the individual marketplace, which may not be feasible in areas with limited marketplace options.

It's crucial to assess the suitability of different HRA options based on the specific needs and circumstances of your organization. Feel free to call us for personalized guidance on selecting the right health reimbursement arrangement for your business.

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