Benefits Chalk Talk: Integrated HRAs

Welcome back to another edition of “Benefits Chalk Talk.” In this series at our blog, we provide you with valuable, up-to-date, relevant information about health benefits planning so that you can put the things in place that make the most sense for yourself or your company. At Policy Advantage Insurance Services, we feel that informed consumers can make a really big difference in our industry.

Today we’re talking about “Integrated HRAs.” If you’ve been reading our blog, you’ve heard about HRAs (or Health Reimbursement Arrangements) before. We’re a big proponent of them (HRAs in general) for a number of different reasons. They’re a very “money smart” concept when it comes to health benefits planning. If you want to understand more about the general nature of HRAs before moving on, you can read about them here.

As we’ve mentioned, HRAs are a great way to help employers retain funds that would normally go to insurance companies. There are many different ways to utilize HRAs. There are various strategies and ways to set up an HRA. This blog post is specifically geared towards explaining “Integrated HRAs.”

Question: What is an Integrated HRA? 

Answer: Integrate means to combine parts with another so that they become a whole. In the case of an Integrated HRA, there are two parts that are being combined:

  1. A group health insurance plan.
  2. A health reimbursement arrangement (HRA).

Question: What kind of group health insurance plan works with an HRA?

Answer: Any kind of group health insurance plan works with an HRA, as long it (the group health plan) conforms with PHS 2711 (no lifetime or annual limits, etc). Without getting into details that will confuse you, PHS 2711 is one of the big reasons that HRAs integrate so well with a group health insurance plan.

Question: Why would I want to “integrate” an HRA with a group health insurance plan?

Answer: The integration of an HRA with a group health insurance plan can allow an employer to retain funds that would normally go to insurance companies as premiums. In essence, it is a way for an employer to “partially self-fund” their group health plan. Example:

  • An employer puts in a higher deductible PPO (with the higher deductible, premium dollars are saved). The employer then “integrates” an HRA with the higher deductible group health plan to help cover the raised deductibles, co-payments, and other out of pocket expenses. In this example, premiums are lowered, and the additional out-of-pocket risk (higher deductibles and co-pays) are picked up by the employer, tax-free.

Question: How much money can I give to each of my employees in their HRA?

Answer: There is no limit on this amount, because it is integrated with the group health insurance plan (which cannot have annual or lifetime limits). You can decide the amount that you would like to give to each employee. It’s very budgetable. You can also tier your contributions (ie: managers get $200/month, and drivers get $150/month). There are many different ways that this can be set up. It’s very manageable; you can customize your contributions how you like. Contributions are also distributed tax-free by employees into “qualified medical expenses” through Section 105.

As you can see, when properly designed, an “Integrated HRA” can be a valuable and important employee health benefit. They are a very “money smart” concept to help employers save money, and provide quality health coverage. The Integrated HRA can be also considered another form of defined contribution health planning (because an employer is defining a contribution to an HRA).

If you have further questions about setting up an Integrated HRA, please contact us at any time. They’re very simple to administer. We work with a couple of different HRA third party administrators.

Thanks for stopping by, we hope you found our information to be valuable. Check back at our blog to get further information about funding healthcare. Also, please share with your friends, clients, colleagues, and family. Here are a few of our other information outlets:

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Your Guide: Short Term Disability Insurance

DisabilityIconThe topic of this blog post is Short Term Disability Insurance. Think of this type of insurance policy as a “paycheck protector.” It literally insures a portion of your paycheck in the event that you find yourself disabled and unable to work.

You insure your house, you insure your car… but do you insure your paycheck and income? That’s a very important question to ask yourself, because in the event of a disability, you’ll want to maintain your standard of living as best you can.

There are two types of disability plans:

  1. Short Term Disability Insurance
  2. Long Term Disability Insurance

There are specific differences between the two. Short Term Disability Insurance is our area of concentration in this blog post. Short Term Disability Insurance means just that: it insures your income/paycheck for the short term.

Typically a short term plan will have a benefit period of between 3 and 18 months. The benefit period is the period of time that your insurance plan will pay you in the event that you become disabled and are unable to work. If you’re more concerned about a situation where you’ll be off of work for a year or more, you may want to look into a long term disability plan.

The benefit amount (the amount of money you receive from your plan) is dependent upon income. The benefit typically replaces a percentage (or portion) of your wages. In most cases, that amount is between 50%-70% of what you would normally earn. You will not typically find a plan that will cover 100% or more of your income, because there needs to be incentive to go back to work.

Disability plans also have what is called an elimination period. The elimination period is the amount of time that you must wait in order to begin receiving your benefit. For example, if you have a 0/7 (accident/sickness) elimination period, your plan will begin paying you right away (0 days) for an accident, and on the 7th day for a sickness. Typical elimination periods in a short term plan are: 0/7, 0/14, 7/7, 7/14, 14/14 and so on. The elimination period will adjust your premium payment (up or down), based on the amount of time you are willing to wait to receive your benefit.

Another important thing to consider is if you have off-the-job coverage only, or if you are also covered on the job. Most plans are off-the-job coverage only (because worker’s compensation typically pays for on the job disabilities). Make sure that you understand where you are covered under your short term disability plan.

A final thing to consider are state disability programs. If your state has a disability program, in most cases, you’ll need to factor in the amount of benefit you’d be eligible for from the state if you were to file a disability claim. In California, it’s up to ~56% of income. Beyond that, a person is on their own. If a person wants more income protection than what the state is providing, he/she can find a private plan that will help bridge that gap up to ~70% of income. The following states and territories have state disability income programs:

  • California
  • Rhode Island
  • New York
  • Hawaii
  • New Jersey
  • Puerto Rico

That’s all for now on Short Term Disability Insurance. This can be a very important concept for many people because it insures your income and your livelihood (paying for rent, mortgages, car payments, child care, groceries, utilities, etc). Make sure to contact us if you have questions.

Thanks for stopping by, we hope you found our information to be valuable. Check back at our blog to get further information about funding healthcare. Also, please share with your friends, clients, colleagues, and family. Here are a few of our other information outlets:

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Benefits Chalk Talk: Consumer Directed Healthcare

This is our first post in our series called “Benefits Chalk Talk.” Much like an after-practice or halftime chalk session in athletics, our goal is to help empower our clients to put all the many different benefits tools in play.  And, much like you face different opponents in a sports contest (and strategies change over time)… our chalk sessions will provide relevant, up-to-date information that will help give you the advantage.

Today’s topic is “Consumer Directed Healthcare.” We selected this as our first concept for a number of different reasons:

  1. Consumer Directed Healthcare’s foundation rests upon individual choices, planning strategies, and knowledge.
  2. Consumer Directed Healthcare will be a concept of emphasis in the post-healthcare reform (Obamacare) environment.
  3. Consumer Directed Healthcare emphasizes the direct involvement of the consumer, encouraging people (and employers) to make sound, informed purchasing decisions (the idea is to make the whole system more efficient).

HealthBenefitsChalkTalk1So this leads us to our question: What exactly is consumer directed healthcare?

Well… consumer directed healthcare has many different definitions. Sometimes it’s even referred to as consumer driven healthcare.

This is the definition we use at Policy Advantage Insurance Services:

Consumer directed healthcare is the idea that patients will behave as medical consumers. Patients will be the ones deciding how their healthcare dollars will be spent. Not doctors, employers, insurance companies, or the government.

Some definitions claim that consumer directed healthcare must be utilized with a high deductible health insurance plan (HDHP). We reject this definition, because we think that all tools and programs must be considered when someone is directing their own program (whether-or-not their strategy includes the use of a high deductible health insurance plan).

There are many things that go into consumer directing:

  • Am I an individual or employer?
  • What is my personal situation (family, hobbies, lifestyle, etc)?
  • Should I utilize private or public options (or a combination of the two)?
  • What type of heath insurance plan should I put in place?
  • What are HSAs and HRAs?
  • What do I need to know about dental, vision, and ancillary programs?
  • What kinds of tax incentives are available to me?
  • Plus others…

We’ll answer these kinds of questions in future blog posts. “Benefits Chalk Talk” will identify the different areas of healthcare benefits planning, and then inform the consumer on how to put them into play.

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