Health Reimbursement Arrangements (HRAs) are one of our favorite “tricks of the trade.”
Low deductible health plans are expensive and, if the coverage is infrequently used, the insurance company wins that bet. HRAs stack the cards in favor of the employer.
For example, consider a group that buys a $5,000 deductible plan but reimburses 80% of dollars $1,301* thru $5,000 using an HRA. The employees’ exposure remains low. Everyone pays lower premiums. And the employer usually enjoys a predictable risk; i.e., about 15% of the total exposure.
But, for a client concerned about reimbursements that could fluctuate significantly month to month, there’s another way to skin the cat. (Sorry, Abby!)
What if you could pay a fixed monthly premium to make the same reimbursements in the example above? You can. It’s called a GAP Plan or, in Jon-Speak, an insured HRA.
So, which is the better solution; HRA or GAP?
Here’s a hint. GAP premiums are based on plan design and the demographics of the group, not claims experience.
* Extra Credit Question: In my example, why did I start the reimbursements at $1,301?