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Examining the changing landscape of Health Reimbursement Arrangements (HRAs) reveals a growing adoption trend fueled by the pursuit of cost-effective solutions amid challenges in the group market.
As the popularity of HRAs continues to surge across groups of all sizes, Liferaft emerges as a preferred administrator, experiencing substantial growth in managing HRAs for organizations.
The HRA is increasingly popular with groups of all sizes
There’s been a big increase in the number of groups adopting the HRA and working with Liferaft as their group administrator. This growth reflects the rising popularity of HRA solutions across the industry. More organizations are recognizing the benefits of managing their benefits through HRAs, and Liferaft is becoming a preferred choice for groups seeking streamlined and comprehensive HRA management. The user-friendly design, competitive features, and cost-effective solutions have contributed to the increasing popularity of our HRA platform.
New groups use QSEHRA as a way to offer benefits for the first time
For new groups just beginning to offer health insurance, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a simple and strategic option.
Larger groups switching to HRAs with greater frequency
Notably, larger groups are increasingly opting for HRAs, attracted to significant cost-savings and the ability to insulate P&L from rising healthcare costs. Larger organizations are recognizing the financial advantages and flexibility offered by HRAs in managing employee benefits.
HRAs under-penetrated in the group broker market
Despite the increased popularity of HRAs, there is still significant untapped potential within the group broker market. As awareness and understanding of HRAs rise among group brokers, we anticipate HRA adoption to grow exponentially.
Employers are interested in the HRA but cited the following as impediments to HRA adoption.
Lack of employee interest / engagement
Potential clients expressed concern about employees not understanding or showing interest in an HRA benefit offering, which led employers to prioritize other employee benefit programs.
Too much effort to switch
Potential clients perceived switching to an HRA as overwhelming or time-consuming. Even with individual onboarding support, having employees on different plans and the paperwork and reporting required by an HRA was too intimidating to move forward.
Overwhelmed with paperwork and reporting to stay compliant
A significant concern was the perceived burden of paperwork and reporting required to ensure compliance. Even though Liferaft completely handles the paperwork and reporting, the novelty of HRA reporting compared to group health plans caused concerns.
Too few employees to make the management of the HRA worth it
While the HRA can be an extremely cost-effective solution for smaller businesses hoping to subsidize the cost of health insurance, participants with smaller employee populations (under 10) expressed reservations about the value of managing HRA accounts for a limited number of employees. Many employees had already enrolled in their spouse’s coverage or qualified for subsidized plans that negated the value of the HRA.
Price
While the HRA usually offers cost savings for employers switching from a group plan, plan pricing is a key concern for potential clients. For business owners who don’t currently offer coverage, any budget allocated towards employee healthcare is up for debate.
HRAs not established / well known
Lack of knowledge about how HRAs work or their value is a barrier for both business owners considering the product offering and for building employee enthusiasm.
Wanted better claims / insurance payment automation
Potential clients wanted more automation in the claims and insurance payment processes, lessening the amount of review employers need to process claim payments and disbursements.
Wanted payroll integration
Business owners expressed a preference for a streamlined connection between HRA accounts and their payroll systems.
Wanted platform with more products
When considering the adoption of a new SaaS tool for their employees, business owners were interested in platforms that acted as a one-stop shop. If they were to set up a reimbursement program for health care costs, they wanted the same tool to offer expansion possibilities, like travel reimbursement or payroll processing.
Ultimately, those who didn’t move forward with an HRA often faced the following:
1. Short timeline to change management (didn't have time to transition)
Some companies faced time constraints and a tight timeline, making a smooth transition to HRA accounts challenging. The urgency of change management might have led them to opt for solutions with quicker implementation or less disruptive onboarding processes.
2. Located in states where the individual exchange was less attractive than the existing group offering
For some companies, their state’s individual health insurance marketplace was either not competitively priced or did not have the same quality plans seen on the group market. The perceived drawbacks of the individual exchange in their specific region influenced their decision to maintain the status quo with group plans.
3. Chose to stay with group broker for specific network considerations for certain employees
In some instances, companies opted to remain with their group broker due to specific network considerations essential for certain employees. The existing group plan likely provided a network that met employees' unique needs, making it a deciding factor in the choice to stay rather than transition to HRA accounts.
HRAs are gaining traction due to their inherent cost-effectiveness, offering a strategic solution for organizations navigating challenges in the group market. The flexibility and efficiency in benefits management that HRAs provide have contributed to their growing popularity among organizations of varying sizes.
The evolving landscape sees a shift towards more comprehensive and tailored benefits beyond standard health coverage. Organizations recognize the need to cater to diverse employee needs, leading to a noticeable uptick in interest for specialty coverages within HRAs, addressing gaps left by traditional carriers.
The ongoing evolution of HRA management tools and processes introduces complexity that makes group brokers cautious. This underscores the need for continued refinement and simplification in HRA management tools to enhance broker confidence and promote broader adoption.
On average, groups with HRAs experience lower reimbursement limit increases than the national average in the group market. This suggests that HRAs offer a potentially cost-effective solution, providing organizations with better control over rising healthcare costs than traditional group plans.
Employers voiced concerns about employee interest, the perceived effort required to transition to HRAs, paperwork and reporting burdens, and the perceived value for smaller employee populations. Pricing considerations, lack of awareness about HRAs, and desires for better automation, payroll integration, and expanded platform capabilities also emerged as common themes expressed by employers exploring HRA adoption.
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.
