Businesses Can Save Big by Switching to an HRA in These States

While a Liferaft Health Reimbursement Arrangement has many different use cases, it can be particularly effective in providing major medical insurance in states where the rates for health insurance on the state’s exchange are cheaper than group health insurance rates. 

April 3, 2023

Where an HRA is a No-Brainer

In some states, the rates for healthcare plans on the individual exchange can be much more affordable than those for small group plans. Companies can use an HRA to directly reimburse employees for the cost of their individual health insurance premiums. This helps employees save money on their healthcare costs and can also help companies save money on their overall healthcare budget.

Setting up a Health Reimbursement Arrangement with Liferaft is simple and cost-effective. Companies in states such as Colorado, Maryland, Massachusetts, Minnesota, New Mexico, North Dakota, Rhode Island, and Washington are saving over 40% when switching to an HRA, giving employees the flexibility to choose an individual insurance plan instead of providing a one-size-fits-all group plan.

* Average Marketplace Premiums by Metal Tier, 2018-2023, Kaiser Family Foundation ** 2021 Employer Health Benefits Survey, Kaiser Family Foundation

The Advantages of HRAs Over Traditional Group Insurance

  • Employees get to choose their individualized insurance plans and can be reimbursed for out-of-pocket expenses.
  • Since there is no pre-funding required, employers can save on upfront costs.
  • Fixed dollar amounts mean that annual premium hikes are a thing of the past.
  • There are no participation requirements, so even if employees don't use the benefit, it won’t impact the HRA plan.
  • Employees get tax-free reimbursements, and employers can deduct the reimbursements from taxes, so everybody benefits from tax breaks.
  • Employers have complete financial control over their benefits. Employers decide how much and how frequently to reimburse employees' expenses with broad discretion in deciding who is covered under their plan.

The administration of an HRA account can take less than 5 minutes a month, allowing the employer to focus on real HR issues.

Your guide to flexible & affordable benefits — download now.

Group health can be complex, restrictive, and costly. Liferaft offers something different.

Liferaft's 2023 Whitepaper on HRAs is the most comprehensive guide available, giving you what you need to determine if an HRA makes sense for your business.
You will automatically be redirected to your whitepaper download after submission.
What you get in your guide:
• What is an HRA?
• HRA Requirements & Features
• Eligible HRA Expenses
• When an HRA Makes Sense
• Different HRA Types
• States Where HRA Works Best

Frequently Asked Questions

Are Health Reimbursement Arrangements considered income?

According to the IRS, employer-issued reimbursements are not considered income and are exempt from federal income and payroll taxes. This is one of the significant tax benefits of distributing employee benefits through a Liferaft Health Reimbursement Arrangement.

What happened to unused funds? Do they roll over?

One of the central values of a Liferaft Health Reimbursement Arrangement is flexibility, and the answer here depends on the employer’s specific policies. Some companies may have a "use it or lose it" policy regarding account funds, meaning that any funds not used by December 31st will be forfeited and cannot be carried over into the new year. Other employers allow employees to roll over a certain amount of money from one year to the next. Put plainly—it’s up to you!

What are some disadvantages of an HRA?

Because the funds in a Liferaft Health Reimbursement Arrangement are employer-funded, the employer owns the money in the account even though it is for the individual to use. If the person leaves the company or their job is terminated, the account funds stay behind with their former employer.  Employers can offer a retirement account that allows former employees to utilize funds after leaving the company.

Additionally, different employers often have different rules for reimbursement, which can be a problem for employees if they switch companies. Aside from mandatory requirements like COBRA continuation, ERISA and HIPAA, plans can vary widely.

Which employees are eligible for a Liferaft Health Reimbursement Arrangement?

Liferaft Health Reimbursement Arrangements can be offered to any employee, as long as each job class is treated equally. This means you can easily provide benefits to part-time and seasonal employees. However, depending on what type of expenses you plan on reimbursing, there are specific IRS requirements. After learning about your business and goals, Liferaft will make a plan recommendation for the most tax-advantaged, affordable way to structure your account.

2023 Year-End Report: 
HRA Trends & Insights

Liferaft's 2023 Year-End Report gives brokers and business owners the full breakdown of HRA market challenges, employer concerns, growth opportunities, and more, to help you can stay ahead of the curve.
You will automatically be redirected to your whitepaper download after submission.
This whitepaper includes:
2023 HRA Trends  |  Top Employer Concerns  |  Trends in HRA Account Types  |  Potential Pitfalls & Challenges  |  ICHRA Enrollment Stats & Trends  |  2024 Areas of Opportunity & Growth

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.

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