"Self-Insured Medical Reimbursement Plans"

How do HRA's (Health Reimbursement Accounts) work?

With the increasing cost of healthcare, HRA's are quickly becoming a popular cost-containment vehicle. Section 105(h) refers to the section of the Internal Revenue Code that provides the basic operating rules for these plans. A 105(h) plan is a separate written plan of an employer designed to reimburse employees for medical expenses not covered by health insurance of the employees, their spouses and/or dependents. These expenses may include health insurance co-payments and deductibles as well as any type of expense that the employee's health insurance may not cover, e.g. dental or vision care.

The plan operates on a twelve-month plan year basis. The amount of expenses for which an employee may be reimbursed in any plan year generally is limited to a specified dollar figure. Some plans allow a rolling forward of unused amounts to future years.

Where a plan does not provide for rolling account balances, the aggregate amount of unused reimbursement capacity for a plan year may be used in the succeeding year to increase the maximum reimbursement amount for all employees.

A 105(h) plan is a "group health plan" subject to COBRA. Accordingly, an employer's adoption of a 105(h) plan should be reflected by appropriate modification of its COBRA forms.

HRA Advantages

Employer:

• Mitigate on-going premium increases
• Plan design allows for employer discretion regarding employee reimbursements
• Flexibility to offer innovative health program thereby increasing employee satisfaction
• Increased employee awareness of medical expenditures

Employee:

• Lower employee contributions to premium costs
• Reduced or eliminate first dollar expenses

• No "Use it or Lose it" rule

      Plan design options may also allow for:

• Unused account balance to be rolled over to next plan year

• Use of Debit Card makes access to account balance simplified

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