Charging an HRA premium???

[Guest BeneGal]

We are considering dropping our dental plan, vision plan, and alternative care plans and setting up an HRA instead.

Can we charge employee's a monthly premium to participate in the HRA?

We would place a deductible on the HRA (about $50 per family member) and allow either a full rollover or a rollover up to a maximum dollar amount (we might cap it) not sure yet.

We currently have an HMO w/ Rx coverage which will remain in place, but everything else would be dropped and replaced with an HRA plan.

What are your thoughts out there????

[GBurns]

I do not see where there can be ANY employee contribution to an HRA.

I did not understand your post. From the phrase "We are considering dropping ", it seems that your currently have insured plans. If you are dropping insured plans and "setting up an HRA instead" does that mean that you will be self-funded (self-insured) for these benefits?

If you are shifting to self-insured, What is the advantage that you see over a section 105 MERP for the plan design that you set out, except for the possibility of rollover funds (which probably will be nothing)?

[mroberts]

I'm also a little fuzzy on this one. I really don't see what the advantage of an HRA would be for dental and vision plans. In theory, HRA's are designed to make employees better consumers when it comes to medical services. Overutilizing lab work, diagnostic services, emergency room visits, sick visits and prescription drugs are all common problems of medical plans, however, I just don't see where this is too much of a problem on vision and dental plans. Dental and vision costs are pretty much in check (dental trend is under 8% and vision trends are under 5%), and the costs of these two plans combined are about a seventh of the cost of medical plans. So what would your company gain by subjecting these coverages to an HRA?

Additionally, are you just dropping your insured plans whether they are fully-insured or self-insured? If this is the case, I agree a Section 105 plan would be a much better option.

[Guest BeneGal]

If we charge a premium who says it has to go into the HRA? Wouldn't it just belong to the company?

We feel like there will be some savings in that:

1. Dental premiums are really getting outrageous

2. Vision premiums you pay for 24 months before you get a benefit and usually it's a $50 exam and a $100 toward glasses/contacts... on top of the fact that the company is paying two years worth of vision premiums for all employees when only about 48% of our staff even wear glasses or contacts and they would be the ones utilizing vision.

3. The alternative care premiums are really rising and our plan won't break down chiro/naturo/acup so with the HRA I believe we can exclude certain services such as naturo & acupuncture.

Yes we will allow them to roll over - thus allowing them to "save" up the money to use for bigger services. We are also going to put a 10 year requirement for continued access - meaning if an employee works for 10+ years for our company then if and when they quit or retire after the 10th year the existing balance in their account will remain available to them to claim against until exhausted. We won't be contributing anymore to it but the balance will be there.

We thought about a 105 plan and decided that utilizing the HRA method allows us to set up one plan and keep it. HRA's are flexible and can allow us later to make changes to our medical plan maybe changing our HMO to a high deductible plan and increase the amounts in the HRA without having to set up another plan and do all the documents etc...

My question is why not an HRA? You all seem to be fairly against HRA's and I'm wondering why? Do you know some hidden problems with them that I don't???

As always, thanks for you input though... I really appreciate it!!!!!!!!

[GBurns]

I would say that we are not against HRAs we are just in favor of making informed choices based on factual research and a good understanding of the subject matter.

If you charge a premium, where will it go??????

AND, it was your post that said in BIG BOLD PRINT "Can we charge employee's a monthly premium to participate in the HRA?" That is who said that it was going to the HRA.

What is the logic or rationale for even thinking that any money deducted from the employees could ever "just belong to the company?"??

Your statements "the HRA method allows us to set up one plan and keep it" and "HRA's are flexible" and "without having to set up another plan and do all the documents etc" indicate that you need to research and learn much more about 105 plans including HRAs, your current knowledge level seems too low to be involved in making decisions of this nature.

An HRA is a section 105 MERP with more restrictions than a standard or "straight" 105 plan. Therefore you would not have more flexibility.

Any requirements that would cause the setting up of another plan because of changes in benefits etc would be the same for either type.

Any changes in documents etc would be the same for either type.

Again, from what you have posted there most likely is no need, basis or logic for an HRA.

[Guest BeneGal]

Thank you Gburns for being rudely blunt :angry: , I appreciate your candor --- I think.

[GBurns]

No rudeness was intended, and bluntness seems to be the way I write sometimes, I guess I write too many responses to client's legal advisors on technical issues.

[Ron Snyder]

Benegal: Yes, you can charge employees a premium to participate in an HRA. However, the employees' monies will need to go directly toward payment of insurance premiums in order for employees to obtain pre-tax treatment of their contributions.

After-tax employee contributions could be used as funds inside the HRA, but once contributed by the employee:

1. They would likely be considered "plan assets" under the DOL regulations;

2. They cannot be refunded to the employee, except as reimbursement of medical expenses realized.

I am very much pro-HRA, but you haven't presented significant evidence as to why one would be appropriate for your firm. Also the plan design you suggest is flawed.

[mroberts]

I am also pro-HRA in the right situation, which I don't feel is really the case here. If dental premiums are getting outrageous, I would suggest analyzing what's making the premiums outrageous and find a way to change the plan to keep pricing stable. For example, does your dental plan have a managed care aspect? If it's a PPO plan, have you thought about having a MAC or Value plan to keep costs down? I can go on and on with the ways I would analyze the plan to make sure I'm doing everything possible to keep costs in check.

As for the vision plan, why not make it voluntary if only half the employees are utilizing the benefit? Some carriers will not allow a voluntary vision plan due to adverse selection, but others will price it accordingly and allowed it to be offered this way. Or you could do a high low plan for the vision benefits in which you pay 100% of the cost on the low plan, which might provide minimal benefits such as an exam and scaled back lens and frame coverage and allow employees who have additional needs to buy up to a better benefit? There are just a lot of different avenues I would go down before I would assume an HRA plan is going to be the panacea for any cost problems the employer is having.

The other big question I have is how large is the client? There's a certain cut off where HRA's could make sense and will they definitely wouldn't make sense, especially with coverages like dental and vision. Again, the costs for these coverages are a fraction of what they are for medical insurance.

[GBurns]

Vebaguru,

Since an HRA must be solely employer funded, it therefore cannot have employee contributions. If there can be no employee contributions how can the employee pay or be charged?

[Mary C]

GBurns -

we put in an HRA last year utilizing Lumenos. It has the medical reimbursement amount, and when that's used up a 100% out of pocket amount, then insurance protection. We (the employer) fund the medical reimbursement portion of the account with an annual amount that partially rolls over into the next year if not used, and yes, we DO charge the employee a premium which can be attributed to the insurance coverage that pays expenses over and above the medical reimbursement and deductible amount.

mary c

[GBurns]

An HRA (in your case a medical expense reimbursement account) may be used in conjunction with a section 125 Plan. It is through a salary reduction under the section 125 cafeteria plan that you charge and deduct the premium from the employees NOT the HRA (medical expense reimbursement account). In addition the amount that you charge the employees does not go to the HRA in any case, it goes to the POP portion of your section 125 cafeteria plan.

Look at your sales literature and all the documentation from Lumenus. It clearly states and explains that these are 2 separate and distinctly different items. Also read the explanatory Revenue Ruling and Notice.

[Ron Snyder]

GBurns-

Apparently you misunderstood. I stated that "you can charge employees a premium to participate in an HRA. However, the employees' monies will need to go directly toward payment of insurance premiums in order for employees to obtain pre-tax treatment of their contributions."

I did not state that the employees' premiums went into the HRA, only that they were paid in conjunction with the HRA. In fact, the premiums go through a POP, but HRA contributions are contingent upon the employee's taking the POP salary reduction. This, of course, is subject to passing the non-discrimination testing under 105(h), but all HRAs are.

VG

[GBurns]

vebaguru

Are you charging the employee a premium for participating in the HRA?

Or,

Are you charging the employee part of the health insurance premium which they pay through the Cafeteria Plan or POP plan etc?