HRA - Health Reimbursement Account
- Thread starter Small Town ND
- Start date
- Thread starter
- #12
Small Town ND
Expert
- 30
The Elevator actually pays 100% of the plan. What I am suggesting is that they move from a $250 deductible to a $2,000 deductible with the employee paying the first $250 and the elevator paying the next $1750.
If they are as healthy as they think... the elevator could easily save upwards of $80,000 a year, even if they have a bad year and half(national average is 14%) of their employees use up the $1750 that the elevator has set aside... they still would be in the black about $30K.
As on right now... and on paper, it seems like a No-Brainer to me!!
- 1,459
I've had a lot of success with this concept in the past, still implementing a few from time to time. I assume you are keeping the group plan chasis, just moving to a higher deductible plan. A couple things to be aware of:
Plan Year vs. Calendar Year Deductibles: If it's a Jan. 1 renewal date, it doesn't matter. If it's not, you want to do your research on this one. For example, if a plan starts on July 1st, and runs on a calendar year, you have a difficult decesion to make: do a short plan year, with much more employer liability the first 6 months, or not have the deductible and HRA reset together.
I had a plan recently that was on a plan year, but when we applied to a new carrier, the new carrier only offered a calendar year deductible. This was a little messy to get worked out.
Choosing a TPA: a bad TPA to administer the HRA reimbursements will be a huge time drain and you will curse the day you chose to take the group the HRA route. I've have one TPA I use to use that screws up more reimbursments than they get correct. Either way, you will have many more questions than with a non-HRA plan, even with a good TPA in place.
Employee Education: absolutely critical to get the plan started after making the transition from the old plan.
Avoid TPAs that Due Quarterly Smoothing of Claims: in my experience, more trouble than they are worth, even though the concept sounds appealing at the front end.
Debit Card Option: some TPAs give the group an option to give their employees debit cards to pay the providers instead of submitting EOB's. It works great for prescriptions and for other expenses most of the plan year. However, it will make your life bad during the plan run out period. For example, an employee incurs a claim on Dec. 20th and the clinic bills him in mid-January.
If he pays with the debit card, the TPA will count it in the new plan year versus a reimbursement in the old plan year as should have been done. This creates a huge headache to get it fixed. I had one circumstance where the employer had to get $700 from an employee that was over reimbursed due to this and the employee had already spent the money, didn't have any savings. Very ugly!
Have the Employer Set-Up a Seperate Checking/Savings Account and Fund the Full Liability Over 12 Months Into the Account (pay out claims as needed): this will make year two much more enjoyable for you and the employer by having a lot more options going forward. Not always possible to do, but I always suggest it and usually sell them on doing so.
Not trying to discourage you, in fact, I love the concept. Just want you to go into it with your eyes wide open. Good luck on getting the group, sounds like it could be a nice case for you!
Could be different in your area, but simply changing the deductible or even moving to a HDHP does not generate much premium savings here. I am a big fan of HDHP's but the premium breaks just aren't there on the group side.
Certainly not enough to generate $80k in premium savings on this size group.
Certainly not enough to generate $80k in premium savings on this size group.
- 1,896
It used to be, but it's not there now. The incentives to switch to HSA's were crushed pretty quickly. In fact, most small groups in IL are better off moving to a $2,500 deductible PPO plan with co-pays and instituting the HRA rather than going full HSA (with or without an HRA).
Stupid, stupid, stupid.
Stupid, stupid, stupid.
- Thread starter
- #17
Small Town ND
Expert
- 30
Well they are currently paying $21,000 a month and it could be dropped down to $14,000 per month with a higher deductible (HRA) and a different company. But again, this is just a soft quote. The owner believe that out of the 20+ employees, the only health condition is a diabetic. (Which is a little hard to believe, but ya never know) The $80,000 is the tip of the spear, I could realistically see savings of $50,000 and up.
Sam, I found that a little hard to believe too. The 14% is actually what one of my carrier reps told me.
- 1,896
I would use the 40% and 60% utilization figures rather than the 14%. It provides a picture that is realistic and can have an actual plan established around it. Even though there's "only 1 diabetic that's causing issues," there are still people who will go to the doctor (either for themselves of their kids), cases of bronchitis/sinus infections that require meds during the winter, some accidents here and there that require ER trips, etc.
There is usage above and beyond what is known, whether either of you likes it or not. Be realistic and honest - he'll appreciate it now and later (when he's writing the checks to cover the claims).
There is usage above and beyond what is known, whether either of you likes it or not. Be realistic and honest - he'll appreciate it now and later (when he's writing the checks to cover the claims).
- 4,096
1st off there is no way you assume what the claims are going to be. I would not even try. The first year on the HRA the company will have an idea of claims.
If they are running a $250 deductible plan then there should be a huge saving moving to the $2,000.
I think you have good strategy to close the deal.
With this type of a group the other option would be raise the deductible and then have the employer pay for a gap policy. This approach might not have the same amount possible savings but a more guaranteed savings.
The gap policy works very well with blue collar companies like this where ownership provides a high level of coverage.
If they are running a $250 deductible plan then there should be a huge saving moving to the $2,000.
I think you have good strategy to close the deal.
With this type of a group the other option would be raise the deductible and then have the employer pay for a gap policy. This approach might not have the same amount possible savings but a more guaranteed savings.
The gap policy works very well with blue collar companies like this where ownership provides a high level of coverage.
DBKuhnke
Expert
Why would anyone choose to pay for their medical costs with after tax dollars when it is so simple to set up a 125 plan and turn those expenses into pretax costs. I'll take that discount any day!!
