Determining whether high deductible health plans (HDHPs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs) are right for you and your employees can be taxing.
The process requires consultation with experts who understand and can make sense of the intricate details of consumer-driven health care. Here is a simple primer that explains the basics.
What makes a high deductible health plan qualified?
A qualified health plan is a health insurance plan that meets these annually determined regulations.
* A minimum deductible
* Annual in-network, out-of-pocket expense limitations
* Indexed deductibles and out-of-pocket requirements
* Except for certain preventive care services, the plan may not provide benefits during any calendar year until the minimum deductible for that year is satisfied.
Are employers required to set up an HSA or HRA if an HDHP is elected?
No. HRAs and HSAs are funding arrangement options that are available to help employees fund higher deductibles and out-of-pocket expenses, but an employer is not required to make either of them available.
Figuring out the differences between an HSA and an HRA is key in deciding whether a move toward consumer-driven health care is right for your company.
* Health savings accounts are typically a good fit for employers looking to reduce their medical insurance premiums with a qualified high-deductible health plan. HSAs are tax-preferred funding vehicles, owned by the employee, much like a 401(k). An HSA can ease the employees' burden of the high deductible.
* Health reimbursement arrangements are typically geared toward employers looking for more latitude in designing their insurance benefits in order to reduce the premium. The employer maintains control over the HRA funds that can offset employee expenses due to benefits reductions.
Do yearly HSA contribution limits apply to both employees and employers?
Yes. The restriction affects both parties.
Are employers required to contribute the same amount to an HSA in the second year if such arrangements were made the first year?
No. Employers are not required to continue contributions into HSAs each year. If the employer wishes to do a one-time contribution, that is its right to do so, just as a company may change its contribution strategy when paying premiums.
If an employer makes $1,000 available per employee for an HRA and the employee only uses $500, can the employer claim the remaining $500 as a business expense?
No. The IRS does not allow this type of accounting.
These questions only touch on consumer-driven health care. The best way to ensure clear answers to your questions is to consult your employee benefits professional.
Jessica Galardini is chief operating officer and executive vice president of HRH Affinity Marketing Group. Reach her at (412) 456-7012.