For any business, investing in employee benefits is crucial. With benefits becoming a differentiating factor for many employees, companies that offer the most get to attract the cream of the crop. With the above mentioned, health benefits such as Healthcare Reimbursement Accounts – HRAs and Health Savings Accounts – HSAs are some of the best ones.
Even employers recognize that they are better than group health insurance policies, which can have restrictions imposed by the provider, have higher costs, and require active participation from employees. To simplify things, introducing HRAs and HSAs is a great idea. Both accounts also encourage consumerism from employees by helping them focus on their healthcare costs and understand how they can be more prudent regarding their healthcare.
Additionally, both HRAs and HSAs encourage contribution since all unused funds are carried forward for the next year, allowing them to start the year off with a small nest egg for their health care.
What are Healthcare Reimbursement Accounts – HRAs?
Despite the title, HRAs are not physical accounts where funds will accumulate. Instead, they can have a classification as notional accounts. These are used by employers to actively reimburse their employees with their medical expenses and health insurance. Employers also pay employees after all costs have been incurred.
Advantages You Can Get with HRAs
HRAs offer certain advantages that employers find to be better for their business. The following are the major ones in the following categories:
Control – Employers get more control on HRAs since they are the only ones who contribute to it. The coverage of medical expenses with this account will only be made to the pre-defined extent. Anything exceeding this will not be covered.
Flexibility – Usage of this account is also flexible, and employers can make contributions for single or family-based coverage. In 2019, contributions for single employees come up to $5,150, whereas families are eligible for $10,450, but these can vary based on the status of the family. Qualifying employees should meet at least the minimum essential coverage requirements. HSAs can also be used with FSA but have a few restrictions on their usage.
Simplicity – Getting coverage through HRAs is easier. Since funds are available in a company account, the employees only need to submit proof of payment, such as receipts and receive the funds. All rules for the HRAs are defined by the company’s plan and guidelines from the IRS.
Given these advantages, it is easy to see why most employers prefer to use HRAs for their employees.
What are Health Savings Accounts – HSAs?
Unlike HRAs, HSAs are financial accounts that are established with any banking institution of the employee’s choice. Individuals need to establish these accounts, but they can only be used for medical expenses that qualify for it. Additionally, the HSA has to be linked with a health insurance plan (high deductible). The good news here is that anyone, employers and employees, can contribute to this account.
Advantages You Can Get with HSAs