Top HRA Plan Challenges – What to know?

Top HRA Challenges

Health reimbursement arrangements, health reimbursement accounts, section 105 plans or simply HRAs – these are all different names for the same benefit. Given that just its name has complexities, it is no wonder that HRAs are often a challenge for employers (and employees).

But have no fear, we will walk you through some DOs and DON’Ts of an HRA plan.

An HRA plan is an employer-funded benefit. Employees use HRA funds to pay for specified out-of-pocket expenses.

If you are just getting started with HRAs, check out the post How do HRAs work? 5 Surprising Facts. If you are ready for a deeper dive, read on.

DO understand the problem

Always start at the beginning. First, understand the problem you are try to solve. In reality, nearly every HRA boils down to two primary goals. First, an HRA helps employees pay their out-of-pocket medical expenses. Second, an HRA helps employers manage their rising benefits costs. While these two goals compete at times, it is important to keep these at the forefront of your HRA plan design.

DON’T add complexity without purpose

HRAs are highly customizable, which has pros and cons. Here are just a few of the decisions employers can make regarding HRA plan design.

  • Expenses paid: What expenses can be paid? Will you restrict expense categories? Will you reimburse different amounts for different expense types?
  • Amount available: Will the amount available vary among employees? Will you set rules on when funds are made available?
  • Restrictions, thresholds and limits: Will you restrict use to in-network providers? Will you set a deductible threshold before funds can be accessed? Do employees need to dance in a circle and sing a song before submitting a claim? (Ok, maybe forget that one.)

On the one hand, customization allows employers to design an HRA to suit their needs. On the other hand, employers can fall into a trap. If the HRA design utilizes unusual expense categories, various reimbursement amounts or complex network approval rules, you may be losing sight of employee’s needs (and the problem you are trying to solve for).

DO implement a design that aligns with desired behaviors

An HRA has the ability to change spending behaviors, when implemented with purpose. Here are a few common HRA designs:

  • Shared responsibility: Using a percent of expense or co-share arrangement can demonstrate a partnership between employees and employers. Employers set a certain percent or dollar value that will be paid from each expense.
  • Post-deductible benefits: Employees take initial responsibility for expenses while employers assist as costs rise above the deductible.
  • General assistance: Employers allow the HRA to be used for all eligible 213d expenses. This provides employees with general assistance in managing their out-of-pocket medical expenses.

DON’T hide behind legal disclaimers

HRAs fall under the definition of a health plan. Under the Affordable Care Act, an HRA must provide legal plan documents, including a Summary of Benefits and Coverage. However, an HRA is not a standard health plan and can be misunderstood when defined by the required legal health plan template.

DO clearly communicate benefits

HRAs can be complicated. Use plain language to describe your HRA. Keep the message simple and answer the three key questions:

  1. What is an HRA?
  2. What is is used for?
  3. How does it benefit me?

Ready to get started?

Download a sample HRA communication template to use with employees.