You
Should Know:
HRAs,
employer-funded accounts that employees can draw upon to pay qualified
medical expenses, are usually offered as part of consumer-directed
health plans (CDHPs), a fast-growing marketplace solution to rising
health care costs.
HRA-based
health plans provide employers with an important new benefits option,
one that helps raise consumer awareness of the real costs of health
care while empowering consumers with greater decision-making control
over their health care spending. HRA health plans usually include a
high deductible, and research shows that total health spending is
reduced when consumers bear more responsibility for their health care
expenses.
Members
of an HRA plan who do not use all of their fund or account in one year
can roll over unused funds for use at a later time for medical
expenses, COBRA benefits, long-term care or Medicare premiums.
HRA-based
plans facilitate access to quality care because preventive care, such
as routine physicals and child immunizations, typically is covered 100
percent and is not charged against the employee's fund. Background:
With health care premiums continuing to rise at double-digit rates (11.2
percent in 2004), many employers have been forced to reduce benefits,
shift more cost to employees or drop coverage entirely. Less than
two-thirds of all employers now offer health insurance to their employees.
The marketplace is ready for increased consumer accountability, and the
popularity of HRA plans is growing fast. In fact, HRA enrollment is
expected to reach 2.6 million in 2005 - more than double the enrollment in
early 2004.
How HRAs Work:
As most commonly constructed, HRAs
are linked with high-deductible health plans that include preventive care
not charged against the deductible and access to information tools that
help consumers make informed decisions. Members can use the fund to pay
qualified medical expenses or roll over unused funds at year end for
future use. Most HRA members who use up the fund then have to meet a
deductible for medical expenses before major medical coverage kicks in.
With the opportunity to determine how and when their health care dollars
are used, HRA members have an incentive to become informed and value
seeking health care consumers.
New York State Society of CPA's Top
Questions About HRAs - Click HERE