Health Reimbursement Arrangement (HRA)
A Health Reimbursement Arrangement (HRA) is a plan that lets employees control how their health care dollars are spent. The plan combines a health insurance plan with an HRA funded by the employer.
How the HRA works
Consider the example using one of our qualified plans with a $1,000 deductible, $1,000 coinsurance:
- The employer puts $500 in an HRA. This money can be used to pay for covered health services such as, hospital care, office visits, prescription drugs and other eligible services under the health insurance program. The employee pays no taxes on the money that goes into the HRA. In addition, the employee doesn’t pay for any covered health care expenses until the employee uses all of the money in the HRA.
- After the $500 in the employer-funded HRA is spent, the employee pays for the next $500 in medical expenses and prescription drugs until the remainder of the health plan’s $1,000 deductible is met.
- Once the $1,000 deductible is met, the employee pays a coinsurance percentage for covered medical and prescription drug expenses up to the health insurance program’s $1,000 coinsurance maximum. When that $1,000 amount is met, the plan pays 100 percent of covered services for the remainder of the benefit period.
An HRA offers:
- Tax savings
- Employees gain a greater appreciation for the value of health care benefits
- Employees have more control over their personal health care choices
- Frequently Asked Questions: Review the answers to some common questions about health reimbursement arrangements.
Q. How are claims for orthodontia expenses reimbursed?
A. Many long-term medical treatment programs, such as orthodontia, can span several plan years, which affects the process of reimbursement. The standard procedure for refunding eligible orthodontia expenses is to reimburse these claims according to the financial contract/agreement the member has with the orthodontist and/or insurance company, which itemizes eligible expenses during each plan year.
Q. What happens to the account balance if the member doesn’t use all the money deposited for the current year?
A. On Oct. 31, 2013, the IRS modified the “use it lose it” rule for health flexible spending accounts. The modification gives employers the option to amend their FSA plan to allow employees to carry over up to $500 from the current plan year to their FSA for the following plan year. Contact your plan’s representative to discuss your plan options.
Q. What happens if the member has eligible medical expenses at the end of the plan year and a claim is not submitted by the end of the plan year?
A. The member will have a run-out period in the following year to submit claims for eligible medical expenses on services provided during the plan year. Check plan materials for specific information.
Q. Can a member change the amount of money set aside in a Blue by Design account(s) during the plan year?
A. Generally, a member cannot change his or her election until the next enrollment period. However, a member may be allowed to make changes during the year if he or she has a qualifying election event as defined by the IRS. Events may include: marriage or divorce, the gain or loss of a spouse or dependent child, a spouse becomes eligible for or loses medical coverage, a spouse starts or stops working full-time. The member has a limited number of days to make a change after the event has occurred. Refer to plan materials for specific information.
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