• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
New City Logo

New City Insurance

Employee Benefits & HR Consulting Firm

  • Benefits Consulting
    • 401k & Retirement
    • Employee Benefits Benchmarking
    • Executive Benefits
    • Group Health Insurance
  • HR Compliance & Technology
    • Benefits Administration Technology
    • Employee Benefits Compliance
    • HR & Payroll Integration
    • HR Support
  • Our Process
  • Industries
    • Aerospace Industry
    • Biotech Industry
    • Engineering Industry
    • IT Industry
    • Manufacturing Industry
    • Gas & Oil Industry
  • Request Consultation
  • Industries
    • Aerospace Industry
    • Biotech Industry
    • Engineering Industry
    • IT Industry
    • Manufacturing Industry
    • Gas & Oil Industry
  • About
  • Blog
  • Contact
  • Client Portal
  • 888.210.2759
  • Request Consultation

Benefits Of An HRA Wrap Strategy

August 12, 2021, by New City Insurance

Employees talking at table about a hraInsurance premiums have been significantly increasing year after year causing employers to either minimize benefits, decrease employer contributions, or even cancel the plan altogether. Companies with healthier employees often have low health insurance benefits utilization, leading to a low benefit to premium ratio. Health Reimbursement Arrangements (HRAs) take advantage of many employees not using their benefits, which allows employers to offer the most comprehensive coverage for the best price.

What Is A Health Reimbursement Arrangement?

An HRA is an employer-funded plan that is used to reimburse an employee’s Out-of-Pocket medical expenses. HRAs can be created when an employer enrolls in and funds a high deductible health plan (HDHP), they then use the HDHP to customize the benefits that are going to be offered to the employees. When using coverage, employees will first need to incur the medical expense, then request a reimbursement from the employer.

For some types of HRA plans, employers provide a preloaded HRA Debit Card to each member that is programmed to only be accepted for health related expenses. When the debit card runs out of funds, the member is responsible for paying the medical expenses until the Out-of-Pocket Max is met.

HRAs are different from a Health Savings Account (HSA) as HSAs are like a personal savings account with tax benefits; funds can either be saved, withdrawn for personal use, or used for medical expenses. HRAs are not accounts, so employees are not able to withdraw funds and use it to pay for their medical expenses. HRAs allow employers to contribute to employees’ medical expenses like HSAs without losing money on unused contributions.

First Dollar HRA Wrap Coverage

health reimbursement account write on a paperwork isolated on office deskA First Dollar HRA plan is designed to reimburse expenses starting with the first dollar up to the allocated amount in the HRA account. This plan complements a higher deductible insurance plan, and helps pay for deductible items covered by insurance only. The First Dollar HRA strategy is a strong option for companies looking to either offer a bridge for a higher deductible health plan or a very rich plan covering most or all their employees’ insurance expenses.

HRA Wrap Strategy

By using an HRA Wrap Strategy, employers can customize employee benefits for a lower premium. There are plenty of HRA strategy options, as outlined below:

Traditional Coverage

  • Employer will enroll in a high deductible fully insured plan
  • Employees receive a normal medical plan with lower deductibles, co-insurance, and copays

Mix & Match Coverage

  • Employer will enroll in a high deductible fully insured plan
  • The HDHP will be used to create several plans for employees, such as a high-level plan and lower-level plan

Kaiser HMO Coverage

  • Employer will enroll in a high deductible fully insured plan
  • Employees are set up with debit cards to pay for their services at health facilities until the balance runs out
  • Employees pay remaining amount of expenses until the Out-of-Pocket Max is met

When switching from a traditional insurance plan to an HRA plan, employers can save approximately 20 percent each year. By utilizing HRA plans, employers can offer employees competitive coverage at a discounted rate. Along with the discounted premium, another advantage that HRAs have is the ability to customize the plan to meet the employees’ preferences. Employers can create normal high-level plans with an HRA that is at a fraction of the cost.

The downside of using HRAs include the additional paperwork, cash flow issues, and eligibility limitations. Maintaining a traditional medical plan can already be a stressful time for businesses; adding an additional component to the benefits package can add an extra level of complexity.

Short term cash flow issues may arise in the event that all employees opt to use the employer’s contribution all at once; the amount allocated for HRAs needs to be ready to use. Another issue with HRAs is that they are not available to all businesses; partnerships, self-employed business owners, and members of LLCs are not able to enroll in HRA plans because of the way that the business is taxed.

Companies That Will Benefit From An HRA Wrap Strategy

company benefits reprersentationHRA eligibility depends on the way that the business is taxed. Partnerships, s-corps, and sole proprietors are all taxed as the owner being self-employed, so they are unable to participate in an HRA plan. Corporations, such as c-corps and non-profits, are eligible to enroll in an HRA plan because the owner is taxed separately from the business, qualifying the owner as an employee.

Businesses taxed as c-corps, a legal entity taxed separate from the owner, are able to use HRA plans with no restrictions, giving the employees and the owner all the reimbursement and tax benefits that the arrangement offers.

Contact An Employee Benefits Consultant

HRA plans have many benefits that they can offer a business, but they also come with consequences. When choosing health coverage, HRAs can be a great option for employers and their employees because of the tax benefits and reduced premiums. For more information about HRA plans and how they can be effective, contact a professional employee benefits consultant at New City Insurance today.

Have Additional Questions?
Call Today: 888.210.2759
Request a Consultation

Filed Under: Benefits

Primary Sidebar

Have A Question?

Ask a question or request a consultation, and we will respond to you in a timely manner.
  • This field is for validation purposes and should be left unchanged.

Footer

New City Logo
Corporate Headquarters 600 B St STE 300, San Diego, CA 92101
888.210.2759
info@newcityinsurance.com

Insurance Products

  • Commercial Insurance
  • Pay-As-You-Go Workers Comp
  • Group Health Insurance
  • Workers Comp
  • Self Funding
  • Minimum Essential Coverage

Benefits Consulting

  • 401k & Retirement
  • Employee Benefits Benchmarking
  • Executive Benefits
  • Group Health Insurance
  • PEOs
  • Wellness Plans

HR & Technology

  • Benefits Technology
  • Benefits Compliance
  • Growth Strategy
  • HR & Payroll Integration
  • HR Support

Industries

  • Aerospace
  • Biotech
  • Engineering
  • IT
  • Manufacturing
  • Gas & Oil
Google Rating
5.0
New City Insurance
New City Insurance
5.0
Carol Zhang
Carol Zhang
04:29 06 Mar 22
As a rapidly expanding national media organization, the employee benefits strategy and administration that New City has provided us during our growth has been invaluable. They have been proactive about informing us of the different benefit strategies available to us as we grow as well as managing the additional compliance laws and reporting requirements at each stage of our growth.
Claudia Villalobos
Claudia Villalobos
20:14 03 Mar 22
New City Insurance made navigating through all the health insurances super EASY. Their documents are highly informative, professional, and easy to work with. Thank you for making the process of choosing a health plan so simple. You guys are THE BEST!
Philippe Salas
Philippe Salas
17:02 22 Feb 22
I never expected to have a good time talking to an insurance salesman, but let me tell you Brendan was quite the treat. He was very helpful explaining the options and has a wonderful sense of humor. I hope to speak with him every time I call.
Jennifer Polito
Jennifer Polito
17:15 09 Feb 22
Super easy enrollment process. Fast and friendly customer service. If you are looking for an insurance company that is there for you every step of the way I highly recommend New City Insurance.
Rocky Salas
Rocky Salas
23:46 07 Jan 22
So friendly, I hope to speak to him again in all my future insurance needs.
Rocky Salas
Rocky Salas
23:38 07 Jan 22
So friendly and soft spoken. I hope to speak to him again in all my future insurance needs.
Jose Brena
Jose Brena
13:20 06 Jan 22
Eric Calciano has been extremely helpful in finding and selecting the right insurance coverage for our company. With many options out there Eric assisted us on getting a low cost provider saving more than 20% than from our competitors and providing excellent coverage for our employees.
Anastasia Beaverhousen
Anastasia Beaverhousen
17:05 28 Dec 21
Signing up for insurance was quick and easy. Felicity Sundsboe
SFCC
SFCC
22:08 29 Nov 21
Jeff Stoltey and his team provide excellent customer service. Jeff has always provided my company SFCC with straightforward options. I went to a larger insurance company only to RUN BACK to Jeff at New City Insurance. I recommend them to anyone needing insurance without hesitation.
Kevin Luby
Kevin Luby
19:13 22 Oct 21
Quick, easy & informative. We were able to secure quality insurance for our small business on a tight deadline. Thanks for the help New City.
Theresa Ruybol
Theresa Ruybol
19:30 01 Jul 21
Eric was so great with us. He was very patient and kind as we are a newer smaller organization who is growing rapidly. With that said, we had made our inquiry, he had great rapid response and mostly had to wait on me. Any request that we made and/or questions we had, he was great answering and helping us understand. Then when we were ready for all documents and to move forward, Brendan helped with getting that together and the two of them worked their magic on New City's end to notify me of what was needed, assist me in that process and confirming that all was complete and approved for the coverage. I just want to say thank you all again so much, as insurance has always been confusing to me, and you all made that process go a lot smoother.Thank you
Andrea Ordendorff
Andrea Ordendorff
21:06 07 May 21
I've been working with both Clayton and Brendan for well over a year. As the purchase of our dental practice was delayed well over 14 months they both patiently supported me and continued to make themselves available. When we were officially ready to sign up they made the whole process seamless and super easy. This team is highly knowledgeable, professional, supportive, and efficient! I can't thank them enough for everything they've done.
T W
T W
22:32 30 Aug 20
I love New City Insurance. I never had a good experience dealing with insurance brokers until I started working with Brendan. He’s awesome! He is patient with me and takes the time to answer all my questions. I’m very grateful for all his help and hard work!
Mary Jane Deyette
Mary Jane Deyette
00:57 11 May 20
Jeff Stoltey is so awesome...even thru my company had only two employees, he took the time each year to research and find the best plan for us. The only reason I am leaving New City Insurance is because we no longer have any employees. Thank you Jeff
Alma Ortiz
Alma Ortiz
22:25 23 Feb 20
Brendan was awesome! I couldn't figure out how to pick my plan and he returned my call on a weekend to help me. Outstansing service!
jessica kavanagh
jessica kavanagh
19:53 13 Feb 20
Brendan was so helpful I definitely recommend him if you’re in need of good help and getting it done promptly. Thankyou so much again.
Tricia DeYoung
Tricia DeYoung
19:49 13 Feb 20
I was very thankful I inquired about this info. with Brendan. He was very helpful so I understand the benefits available much better now. Thank you Brendan.
B Bayer
B Bayer
17:43 24 Sep 19
NCI handled almost everything from start to finish. Clayton and Brendan made the plans easy to understand and walked me through the application process. They got me my ID numbers before my cards arrived so that I could keep an appointment I had already scheduled. My last broker wouldn't have done that. 5 stars!
Jessica Lehr
Jessica Lehr
03:36 07 Jun 19
Our staff was interested in a health plan, but we didn't know how beneficial a solid employee benefits package would be for our business to expand. We'd lose prospective employees because they had more options for their medical insurance which was sometimes more valuable than more pay. The New City team was amazing and gave us as many affordable options as possible so that everyone had their needs met.
Mike McClay
Mike McClay
19:36 03 May 19
My employer uses New City as their insurance broker, and I'm always amazed when I call in for assistance by how knowledgeable and attentive their staff is with my requests. Their online benefits platform makes selecting insurance plans pretty darn easy. I would highly recommend their services.
Next Reviews Write a review
powered by Google
Privacy Policy | Terms Of Use