Healthcare coverage within companies is a critical aspect that significantly impacts employees' well-being and financial strategy. At Liferaft, our clients experience diverse challenges when optimizing their healthcare plans based on their priorities and employees’ requests. One Liferaft client aimed to transition their group health coverage to a high deductible health plan (HDHP) without disproportionately burdening their employees with increased out-of-pocket costs.
The Liferaft client's primary challenge was reducing expenses on their group health coverage by transitioning to a high deductible health plan without burdening their employees with escalated out-of-pocket costs. This transition aimed to optimize the company's healthcare expenditure without significantly impacting the workforce's financial well-being.
Implementing a high deductible health plan was part of the client's cost-saving strategy, yet this posed potential concerns for their employees. The shift meant that employees would face higher deductibles and potentially increased out-of-pocket expenses for medical care.
Liferaft proposed implementing a Standard Health Reimbursement Arrangement (HRA) that could complement the company's new high-deductible health plan. This HRA was designed to comply with all relevant regulations while offering employees a safety net for various health-related expenses.
The core idea was to utilize the Standard HRA to support employees by reimbursing costs that the high deductible plan might not cover. Since the premium on a high deductible health plan was lower than a higher-tiered plan, and the majority of their employees weren’t high utilizers of their health insurance, supplementing the cost of the deductible through a Standard HRA was ultimately cheaper overall than opting for a higher premium plan for all employees.
Reimbursements could be used for expenses like deductibles, co-pays, co-insurance, dental and vision premiums, and other qualified medical costs, ensuring a substantial reduction in the financial impact on employees dealing with out-of-pocket health expenditures or unexpected medical bills.
How it Works
Liferaft's Standard HRA is highly customizable, allowing companies to design the benefit structure according to their preferences. Employers can determine the monthly tax-free allocations, specify eligible expenses for reimbursement, or offer diverse benefits to different employee groups.
Design Your Benefit: Decide how much tax-free money to offer each month, which expenses should be eligible for reimbursement, or provide various benefits to different employee groups.
Employees Purchase Qualifying Expenses: Allowances can be used for qualifying medical expenses and healthcare services, including copayments, deductibles, hospitalizations, and more.
Employees Reimbursed: Our user-friendly 100% digital experience makes it easy for you and your employees to submit a claim and get reimbursed for eligible expenses.
Frequently Asked Questions
What is a high deductible health plan (HDHP)?
A high deductible health plan (HDHP) is a type of health insurance generally featuring lower premiums and higher deductibles than traditional health plans. It requires individuals to pay higher out-of-pocket costs before the insurance coverage begins.
What are the advantages of a Standard HRA for employees?
A Standard HRA offers tax-free reimbursements for eligible medical expenses, reducing the financial burden on employees for costs like deductibles, co-pays, and other qualified medical expenses not covered by the primary health plan.
How flexible are Standard HRAs in terms of customization?
Standard HRAs are highly customizable. Employers can determine the contribution amounts, specify eligible expenses, and even offer varying benefit structures to different employee groups based on the company's needs and employee demographics.
How do HRAs benefit employees?
HRAs alleviate the financial burden on employees by reimbursing various healthcare expenses, including deductibles, co-pays, vision, dental, and other qualified medical costs that may not be covered under the high-deductible health plan. This significantly reduces out-of-pocket expenses and unexpected medical bills.
Are there limitations on the type of medical expenses eligible for reimbursement through a Standard HRA?
Standard HRAs typically follow IRS guidelines for eligible medical expenses, covering various healthcare services and items. However, certain non-qualified expenses, such as cosmetic procedures, might not be reimbursable.
Book your consult with Liferaft
Our team knows the ins and outs of the health insurance marketplace and will guide you towards the solution that make the most sense for your business and your team. Come with questions! Our experts are happy to dig into the details to get you the clarity you need.
During the call, Liferaft will run a cost-benefit analysis on your company's current healthcare spending and show you different ways you can save—without sacrificing plan quality. After your consult, Liferaft will design a unique plan for your employee's health insurance, including suggested plans and accounts, plan policy documents, and the annual budget.