HRA Approach

[NWBenefitProvider]

Here in WA there is a company called Lyfebank that I recently came across when talking with small business owners. The employer sets an eligibility requirement for benefits and then makes a specified monthly contribution per employee into a special account administered by Lyfebank. The individual then buys an individual health policy. If they have money left in the account, it is theirs to use similar to an HSA account.

It is even portable so if they leave the employer, the account moves with them. It is popular for the sake of set an amount and forget it. I am concerned with how they handle people who don't qualify for the coverage. That will change in 2014 and that is when I hope to offer this to my clients.

Do any of you have similar companies offering the same????

 

[ABC]

Yes, that is what the HRA approach is about. There is a lot of ways to set up these accounts. You can make it a monthly medical reimbursement benefit. There is huge flexibility on classes. You can also set it up so that TPA is not holding the money but acting as a record keeper. There are also roll over options.

Once GI hits this will be the way of small group. Unless the GOV. give real small group Tax Credits.

Here in WA there is a company called Lyfebank that I recently came across when talking with small business owners. The employer sets an eligibility requirement for benefits and then makes a specified monthly contribution per employee into a special account administered by Lyfebank. The individual then buys an individual health policy. If they have money left in the account, it is theirs to use similar to an HSA account.

It is even portable so if they leave the employer, the account moves with them. It is popular for the sake of set an amount and forget it. I am concerned with how they handle people who don't qualify for the coverage. That will change in 2014 and that is when I hope to offer this to my clients.

Do any of you have similar companies offering the same????

 

[leevena]

Yes, that is what the HRA approach is about. There is a lot of ways to set up these accounts. You can make it a monthly medical reimbursement benefit. There is huge flexibility on classes. You can also set it up so that TPA is not holding the money but acting as a record keeper. There are also roll over options.

Once GI hits this will be the way of small group. Unless the GOV. give real small group Tax Credits.

A few words of caution about HRA's.

While there is flexibility on class structure, they are still subject to Section 105 nondiscrimination rules. You need to be careful when structuring the classes and how it will test.

Rollovers are allowed, but a payout of dollars for non-qualified medical expenses causes a taxable event. For example, Employee A has a $500 amount in the HRA and terminates employement. That amount, if rolled out to the employee becomes a taxable event. Best not to make this option available.

Prefunding of a HRA is not always the best use of corporate dollars. Rather, it is usually advisable to use it as a transactional account, funding the account when the claim is presented.

 

[ABC]

Look, the HRA is not for employer sponsored health insurance. It for medical reimbursement. Now under the IRS law, individual health insurance premium is qualified as a reimbursable medical expense.

The concept was run through multiple legal resources and one of the being a national carrier. They all approved it.

The approach is not a group health plan. It's a defined contribution using an HRA to reimburse the employees for medical expenses.

There is no pre funding in fact the TPA never holds the money.
You could even say that the TPA is really not a TPA but more of a record keeper. I went this direction so there is down time with transferring funds. The funds are released to the employee through pay roll.

A few words of caution about HRA's.

While there is flexibility on class structure, they are still subject to Section 105 nondiscrimination rules. You need to be careful when structuring the classes and how it will test.

Rollovers are allowed, but a payout of dollars for non-qualified medical expenses causes a taxable event. For example, Employee A has a $500 amount in the HRA and terminates employement. That amount, if rolled out to the employee becomes a taxable event. Best not to make this option available.

Prefunding of a HRA is not always the best use of corporate dollars. Rather, it is usually advisable to use it as a transactional account, funding the account when the claim is presented.

 

[leevena]

Look, the HRA is not for employer sponsored health insurance. It for medical reimbursement. Now under the IRS law, individual health insurance premium is qualified as a reimbursable medical expense.

The concept was run through multiple legal resources and one of the being a national carrier. They all approved it.

The approach is not a group health plan. It's a defined contribution using an HRA to reimburse the employees for medical expenses.

There is no pre funding in fact the TPA never holds the money.
You could even say that the TPA is really not a TPA but more of a record keeper. I went this direction so there is down time with transferring funds. The funds are released to the employee through pay roll.

I don't disagree with this. I was just commenting in case someone read it and ran with it on the group side. I should have worded it better.

 

[junkman]

This will kill the group plan and those that can't pass individual underwriting may (will) end up uninsured. Another approach is to use a HDHP as a core plan with employer HRA underneath. Give the employees the option of buying up to another plan. You could also return any portion of employee contributions to them in the form of an employer HSA contributions. Run all employee payments through a 125 plan.

Most employees take the lower premium plan. A few will fund an HSA. All will fund it if the employer makes the payment from employee contributions.

I'm looking at 2 little groups where covering the unhealthy older owners is about the same total premium as covering the entire group. Employee contributions will make up the difference. At this point people are happy to have coverage because uninsured get the minimum treatment and are rolled out the door.

 

[SamIam]

Maybe I'm missing something here because I sell individual policies After they do a little research why would they pay you a consultant fee when they can get a HRA set up on their own. I'm not trying to be a smart ass or disrespectful but I'm just curious.

 

[ABC]

This will kill the group plan and those that can't pass individual underwriting may (will) end up uninsured. Another approach is to use a HDHP as a core plan with employer HRA underneath. Give the employees the option of buying up to another plan. You could also return any portion of employee contributions to them in the form of an employer HSA contributions. Run all employee payments through a 125 plan.

Most employees take the lower premium plan. A few will fund an HSA. All will fund it if the employer makes the payment from employee contributions.

I'm looking at 2 little groups where covering the unhealthy older owners is about the same total premium as covering the entire group. Employee contributions will make up the difference. At this point people are happy to have coverage because uninsured get the minimum treatment and are rolled out the door.

This approach can work. Depending on where the group is at in its death spiral. This concept will hold the group for maybe 2 or 3 years. Now if the group has gotten 24% and then a 32% rate increase, a employer sponsored health plan is not very attractive.

The HRA approach will kill the group plan. That's the point! Moving off of that platform to a defined contribution. The employee & employer can no longer afford their contributions levels. The group is not meeting participation anyways. The HRA approach now give a benefit to all employees that are not on the group health plan. It is viewed as a more fair company benefit.

Small group is DOA in 2014.

I think this approach can work in large group.
Take a case of 200 lives. Let's say the total cost of the self funded plan is $2 million. The drop the plan and get hit with a $400K penalty. They then allocate $900k to HRA distribution.
They are going to save $600K.

I think this will be an option on groups under 500 lives.

Maybe I'm missing something here because I sell individual policies After they do a little research why would they pay you a consultant fee when they can get a HRA set up on their own. I'm not trying to be a smart ass or disrespectful but I'm just curious.

Valid question and a question that has to be asked.

To get a consultant fee you have to bring value to the client.
The fact that you are the professional and have spent countless hours on finding the best outfit to admin the HRA. The fact that you are giving the best advice to the client to make a decision.
You are running all the employee meetings and educating the employees on options. You are saving the client $70,000 1st year.

Even with all of this being said I am not sure how structuring a consultant fee the 2nd year could be sold.

 

[kheyknee]

You are correct about the 2nd year commission drop. Coupled with the extra time that it takes to meet with every employee to develop individual needs analyses and plans, it causes a big drop in income.

You might consider offering supplemental insurance with a carrier that provides enrollment support manpower.

The agents would work individually with each employee on the major medical, in exchange for the chance to offer the supplemental options.

 

[ABC]

This approach is turning into more work than regular employee benefits.

I had a couple of meetings with the owners, meetings at each location (4) and now individual phone interviews on best options.

This is more work than just a group health plan with dental, vision and life.

I still think this will be the future of small and mid size group.