…for my daughter (single/no dependants) who recently started working at a very large company.
I am very familiar with traditional plans as well as high deductible plans (HDHP) with a Health Savings Account (HSA) component.
However this company has a third option that appears to be comparable to the HDHP/HSA. They refer to it as a Consumer Driven Health Plan and although an HSA is not an option, there is a Health Reimbursement Account (HRA) that seems to be comparable (although smaller) and is funded entirely by the company.
Without saying exactly so, they suggest that it is the best route for single people and single with a couple dependants. They seem to say that the HDHP/HSA is the better route for married folks or single people with more than two dependants.
One thing I’m curious is why they are making those suggestions but I’m also looking for general comments to help me understand.
HRA and HSA plans are very similar, with a few subtle differences.
First - any funds in the HRA health plan account aren’t portable, meaning if/when one leaves the plan/company, remaining funds are forfeited.
Some HRA plans allow employee contributions in addition to employer contributions. Employee contributions are after tax, whereas HSA contributions are tax-exempt. Doesn’t sound like an issue though because you said the HRA plan account is entirely employer funded.
HRA plans may or may not allow remaining plan account funds to roll-over from one year to the next - or perhaps allow only a portion to roll-over. This is entirely up to the employer. Check the plan details regarding rollover allowance, if any.
Lastly, and this is entirely dependent upon the health benefits, is that copays, including drug copays may continue to apply after the out-of-pocket maximum is met for a CDHP with an HRA. An HSA plan must apply all member incurred costs (which are eligible under the plan) toward that deductible and out-of-pocket max. With an HSA, once the out-of-pocket max is met, everything should be covered at 100% for the remainder of the year. With the HRA, there could continue to be out-of-pocket costs.
Anything else different between the two would be specific to the plan design (plan benefits). It could be possible that the plan benefit differences themselves tend to favor one over another.
In my experience, employers who offer both an HSA and an HRA type plan structure them such that they tend to be actuarial equivalents.
Thanks Jeff !!
It seems like the HRA is a baby-step toward an HSA and has the main advantage that the employee doesn’t use his own money. In this way the employer can move his employees toward the consumer concept over the traditional.
Is there anything else I might be missing to help me understand the HRA better?