Enhance Your Benefit Offerings with a Post-Deductible HRA
During this time when unprecedented numbers of employees are changing jobs, employers need creative ways to enhance their benefits programs to increase employee satisfaction and attract new talent. Lowering the employee’s medical deductible by offering a post-deductible health reimbursement arrangement (HRA) is one way to do that.
A post-deductible HRA is a specific type of HRA plan that is designed to be integrated with a qualified high deductible health insurance plan (HDHP) and a health savings account (HSA). To do this, the HRA must require the employee to meet the IRS mandated minimum deductible. In 2022, the minimum is $1,400 for individual coverage and $2,800 for family coverage.
HRAs are very flexible and even in this specific situation, the employer has options for customizing the plan to meet their needs, including choosing the amount that they want to offer and deciding whether any remaining funds are rolled over for use in future plan years or retained by the employer.
Employers can use a post-deductible HRA to help employees by:
- Lowering their deductible. If the medical plan deductible is $3,000 for single coverage and $6,000 for family coverage, the employer can add an HRA so that the employee is only responsible for the first half of the deductible and the employer covers the second half, if needed. This way the “new” deductible is only $1,500 for single and $3,000 for a family. This meets the minimum deductible requirement for an HSA qualifying plan but decreases the amount the employee is responsible for paying. The employer will benefit from lower insurance premiums as well.
- Easing the transition to a higher deductible. Since the employer decides how much they want to offer or potentially be responsible for paying, they can use a stepped approach to reduce “sticker shock.” Perhaps the qualifying HDHP that they have chosen has a deductible of $4,000 for single coverage and $8,000 for family coverage. The first year the employer could choose to make the HRA deductible $1,500 for single coverage and $3,000 for family coverage; then the next year they could increase the employee’s portion of the deductible to $1,700 for single coverage and $3,400 for family coverage. This gives the employer the flexibility to adjust each year based on budgetary constraints as well.
- Providing time to build up their HSA balance. The post-deductible HRA does not affect the amount allowed to be contributed to the employee’s HSA by the employee or the employer. The employer can still contribute to the employee’s HSA in addition to offering the post-deductible HRA, if desired.
- Pairing with a limited purpose FSA. A limited purpose FSA is also compatible with the post-deductible HRA and HSA combination. Employees can use the limited purpose FSA to help them reduce the costs of dental and vision expenses and avoid using money in their HSA.
As with a traditional HRA, the post-deductible HRA can be beneficial to employers as well, giving them the flexibility to design the plan around their current needs and goals.