Services - HRA Administration

What is an HRA?

June 26, 2002 guidance by the Treasury Department and the IRS with Rev. Rulings 2002-41 and 2002-45 gave rise to what is now known as HRA's or Health Reimbursement Arrangements. HRA's allow employers flexibility in plan design, an opportunity to save money, and the ability to provide employees with a more enhanced plan.

Although, HRA's give employers tremendous flexibility and endless options, plans are typically much simpler than traditional HMO or PPO plans.

How does an HRA work?

Employers must first decide on a plan design. This typically includes selecting a high deductible plan from an insurance carrier and structuring a deductible reimbursement level to offer employees.

Once the design is established ESS will generate a plan document that will govern the plan. Additionally, ESS will create a Summary Plan Description (SPD) and a plan matrix to provide employees.

The plan is now ready to implement. Employees will then begin utilizing medical care by going to a doctor, pharmacist, hospital, outpatient, clinic, emergency room, or any medical provider. At each place the employees will present their insurance card, which will generally afford them the discounts provided to the insurance carrier members. Employees will pay their expenses at the time of service and then request reimbursement from ESS according to the schedule created by the employer up to the amount of the insurance plan deductible. All claims are filed with the carrier to show when deductible has been met. Once the health insurance deductible has been met claims will be paid by the carrier.

These types of plans are typically much simpler because they do not have different co-pay amounts or co-insurance percentages for each type of service. Generally, all medical care is treated the same.

What is the difference in an HRA, MSA, HSA, and FSA?

	HRA	MSA (No longer available after 12/31/03)	HSA (Available 01/01/04)	FSA
Ownership	Employer	Employee	Employee	Employee
Rollover	Permitted but not required.	Yes	Yes	No
Contributions	No Limit	Limited to 75% Family Deductible, 65% Employee Deductible	Up to amount of Deductible	No Limits, Employees are limited to employer established limits.
Health Plan	Generally high Deductible but not required.	Must be Qualified High Deductible Plan.	Must be Qualified High Deductible Plan.	Not Required.
Contributors	Employer Only	Employee or Employer	Employee and/or Employer	Employee and/or Employer
Subject to COBRA	Yes	No	No	Yes

Employer Benefits of an HRA
Lower cost health insurance
Employee incentives to make prudent medical expenditures
Flexibility in plan design
More satisfied employees
Can be designed to improve employee retention

Employee Benefits of an HRA
Improved coverage
May gain more health plan options
More control over healthcare expenditures
Lower cost of health insurance premiums

HRA Guidelines

Plan Document and Summary Plan Description

Employer Funded Only

Individuals cannot establish an HRA

Subject to COBRA

Eligibility
    Employees and their dependents
    Not Sole-Proprietors, partners, greater than 2% shareholders in Sub S corporations, and owners of LLC's

Non-discrimination testing required

May pay any expenses under Code §213(d) or be limited to only include expenses subject to health plan deductible

May allow carryover of unused amounts

May or may not make entire amount of reimbursement available at all times

ESS Services

Assist with Plan Design
Produce Plan Document and Summary Plan Description
Provide educational materials for employees
Reimburse expenses as claims are submitted
Maintain employee account balances
Provide reports to employer
Provide statements to employees

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