Health Insurance For Small Business And Unique Employer Benefits Of HRA Accounts
Small business owners and their HR managers are realizing in greater numbers that cost effective solutions for health insurance for small business and for their employees are increasingly becoming a must.
This is the time when businesses in the USA are pressured from two sides - on one side by the requirement of profitability demanded from them by the shareholders, and on the other hand from the increasing competition from Europe, South America, and especially, Asia.
While Affordable Care Act is scheduled to kick in very slowly, taking at least until 2014 until the full implementation, businesses need solutions now. This is where Health or Healthcare Reimbursement Accounts come in handy.
In this article we will present a case that, for a small business, the best way to offer viable benefits yet provide savings to the bottom line is the HRA, Health Reimbursement Account plan. We will compare HRA plans with traditional fully insured plans, HSA plans, FSA plans and present HRA advantages for a small business.
HRA vs traditional health insurance
The money saved in comparison to traditional, fully insured plans for small business are quite obvious. The insurance premiums are extremely high for traditional low-deductible health plans, so the main advantage of the HRA plan is in cost savings. By transitioning from traditional insurance to high deductible health plan, the company will experience tremendous savings, a portion of which it can invest into funding the HRA accounts.
Due to the extreme flexibility of HRA accounts, the transition from traditional plans to HRA plans can be made smooth by initially offering higher annual contribution to the HRA accounts, and then lowering it or modifying it each year as appropriate, based on previous year savings.
HRA plans vs HSA plans
While both the HRA plans and HSA plans work best with high deductible health plans, the HRA plans give the company more control over the funds, and there is not a requirement for any particular type of insurance to accompany the plan as is the case with HSA plans.
The cost savings, and better cash flow management from the company with an HRA plan comes from the ability to either roll over the unused funds into the next fiscal year. HSA simply do not offer such flexibility.
Another cost savings stems from the fact that there is no requirement of equal distribution of cash to all employees with HRA plans.
HRA plans vs FSA plans
The main advantage of a HRA plan as compared to the FSA plan is the flexibility to roll over the funds remaining in their HRA savings accounts into the next year if desired. This can leave a better impression with the employees and can help with retaining the best employees. On the other hand, the unused FSA plan funds are always forfeited at the end of the year.
For much more details on HRA plans, see site http://healthreimbursementaccount.org. The design flexibilities of HRA plans are emphasized in section on HRA plan design.