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Not ready to take the self-funding leap?

Katie Vogel /

Not ready to take the self-funding leap? Consider starting with an HRA.

The thought of taking on the risk of paying out your employees medical claims may seem overwhelming.  There are unknowns, and you may not know where to start to determine if your company is ready to explore the world of Self-Funding.  An HRA, or Health Reimbursement Account, may be the place to start.

An HRA is an account typically paired with a fully insured High Deductible Health Plan where an employer reimburses employees for some portion of their deductible.  Unlike H.S.A plans, where the money an employer contributes is then “owned” by the employee, HRA accounts only pay out if an employee experiences a claim.  This saves the employer money in the long run because they are not just making blanket contributions to all employees across the board, and if an employee does not experience a claim the employer can keep those unused dollars.

Employers also have the flexibility to design the HRA in a way that fits their population.  One common option is to have the HRA reimburse for certain services that apply to the deductible, such as outpatient surgery or hospital stays. Under this scenario, the employee would be responsible for all other copays out of pocket, but could be reimbursed for “big ticket” expenses that may occur throughout the plan year.  A second common HRA option is when employers reimburse the employee for a portion of their deductible.  The employer may reimburse the first $2000 of the employee’s $4000 deductible leaving the employee to pay the remaining $2000 out of pocket.  Whatever the design you decide on, it is recommended to leave some portion of the deductible on the employees to encourage consumer driven health care.

Once you have an HRA in place and you start to payout claims, you will begin to get a sense of how much employees utilize the benefits and how much you as the employer are paying out annually in claims. This is a good strategy to get you, as the employer, comfortable with taking on some risk of your employees’ claims without diving head first into the world of self/level funding.

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