Financial

Here are 6 Situations Where a Liferaft Health Expense Account is a No Brainer

In some situations, opening a Liferaft Health Expense Account is a no-brainer. Here we outline the top six use cases where a Liferaft account just makes sense.

September 16, 2022

What is a Health Expense Account?

A Health Expense Account is something an employer can set up to reimburse employees for out-of-pocket healthcare expenses. The funds in the account are not subject to taxes and can be used to cover a wide range of healthcare costs, including premiums, co-pays, and dental and vision expenses. They can also be used to supplement an existing health insurance plan, helping employees afford important treatments not traditionally covered by insurance, such as mental health care, fertility treatments, prescription drug costs, and more.

Compared to traditional group health insurance plans, a Health Expense Account is more flexible, affordable, and easier to administer. Plus, you can easily tailor plans to fit the specific needs of your employees.

Offering health insurance for the first time

For companies just starting to provide health benefits for their team, a Health Expense Account can be a great option. These plans allow employers to control costs, provide flexibility, and easily scale their benefits as their team grows. 

Most insurers require a certain percentage of eligible employees to participate in the healthcare plan (often 75 percent). These participation requirements often limit smaller employers to offering a single health plan. HRA plans have no participation requirements and give employees the freedom to choose the healthcare plan that works best for their region, family, and health situation. 

Smaller businesses have limited negotiating power and can be stuck with higher premiums than if their employees purchase health insurance through the individual market. As healthcare premiums continue to rise, employers stuck in a small group insurance plan don’t have control over increasing costs. Premium rate increases can present fiscal challenges for new businesses just beginning to offer benefits. 

With an HRA plan, employers decide how much to reimburse their employees, what expenses to repay, and how frequently to process reimbursements. This flexibility makes it easy to set up a plan that works for your business' nuances and budget.  

Providing health insurance for a remote or distributed team

For employers with remote or distributed teams, it can be challenging to find a national carrier that provides high-quality, accessible and affordable in-network care for all team members. Often employers looking for a group plan have to compromise and provide a more expensive or lower quality plan that can cover all employees. 

A Liferaft Health Expense Accounts can save you up to 65% on healthcare costs and give your employees greater flexibility in choosing a plan. If you have remote employees or a distributed team, they can pick from any plan available on the individual exchange, then get a no-tax reimbursement from your Health Expense Account. 

Supplementing group insurance coverage

As premiums and healthcare-related costs continue to rise, providing additional coverage for out-of-pocket health expenses can attract top talent and boost employee retention.

Through a health expense account, employees can be reimbursed tax-free for costs like deductibles, co-pays, co-insurance, dental and vision premiums, and other qualified expenses not covered by their group health plan. This HRA further reduces the financial burden on employees when they have out-of-pocket health expenses or unexpected medical bills. 

Expanding coverage for specialty care

A Liferaft Health Expense Account is an excellent option for employers who are happy with their current group health insurance but want to provide additional coverage for specialty care

Frequently, employers will choose to expand coverage for treatments they deem essential that traditional insurance doesn’t typically fully cover. This can include mental health services, oral and IVF fertility treatments, birth control, prescription pill costs, abortion care and related expenses, and more. 

The employer has broad flexibility in determining what expenses are eligible for reimbursement in their Liferaft Health Expense Account, as long as they qualify according to the IRS Publication 502.

Supplementing your group health insurance sends a strong message that your employees' health and well-being are top priorities.

Resource-constrained company wants to subsidize coverage

If you're a resource-constrained company that can’t cover 100% of your employees' health insurance, a Health Expense Account is a great option. With Liferaft, you can allocate a specific amount to each employee with flexibility on different reimbursement amounts based on the class of employee, defined by hours worked, seniority, location, etc. 

Employees can use the account to pay for a variety of health-related expenses, including premiums, co-pays, and prescriptions. The account is easy to set up and manage—Liferaft handles the paperwork to get your account set up in the most tax-advantaged and affordable way.

This structure helps to control costs for the company while ensuring that employees have some financial assistance with their healthcare costs. Your employees will appreciate the extra help with their healthcare costs, demonstrating you care about their well-being.

Group insurance rates are more expensive than individual rates in your state

In many states, the rates for individual health care plans on the individual exchange are more affordable than those for small group plans. Companies can use a Liferaft Health Expense Account to reimburse employees directly for the cost of their health insurance premiums. This help employees save money on their healthcare costs, and it can also help companies save money on their overall healthcare budget.

States where there are big savings on the individual exchange include Rhode Island (88% cost savings), New Mexico (81%), Maryland (64%), Minnesota (62%), Massachusetts (61%), Colorado (56%), North Dakota (47%), New Hampshire (46%), Michigan (46%), Washington (43%), District of Columbia (40%), California (35%), and more. 

Interested in getting coverage?

If you're interested in learning more about how to save money on your business' healthcare expenses, sign up for a free 15-minute consultation with our team at Liferaft. Many of our clients have also found Liferaft's free Guide to Health Expense Accounts a comprehensive overview of how health expense accounts work and why companies are using them.

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