What Is the Difference Between HRA & HDHP Insurance?

Many people hope that consumer-driven health care will be able to drive down the high cost of medical care. Consumer-driven health care allows individuals to make wiser health care decisions by having them spend their own money out of a health reimbursement arrangement or similar account. If your employer offers a high deductible health care option, chances are it is coupled with one of these HRA plans.

HRA

• A health reimbursement arrangement is designed to work in conjunction with a high deductible health plan. Many workers are reluctant to sign up for a high deductible plan out of fear of high out-of-pocket expenses. The HRA helps to soothe those fears by providing money to pay for much of that increased deductible. In a typical arrangement, the employer funds the HRA with a set amount of money per year. Those who opt for family plans typically receive a larger HRA contribution than those with single coverage. The money in the HRA is used to pay for out-of-pocket expenses, lessening the burden on the employee and encouraging more people to sign up for the less costly HDHP instead of a traditional health plan.

HDHP

• In order to qualify as a high deductible health plan, the insurance program must meet the requirements set forth by the IRS. You can check with your employer to see if your current plan qualifies as an HDHP. If you buy your insurance on the individual market, you can check with your insurance broker to see which plans qualify as HDHPs.

Lower Premiums

• One of the advantages of a high deductible health plan is that it has lower premiums than a traditional plan with a lower deductible. Since both the employer and the employee save on premium costs, these plans have become increasingly popular in recent years. Most employers combine the HDHP option with an HRA account that is funded by the business. That gives workers an incentive to sign up since a large portion of their potential out-of-pocket costs are covered by the funds in the HRA.

Simpler Paperwork

• When you go to the doctor or pick up medication at the pharmacy, the money you spend should come directly out of your health reimbursement account, provided you give the doctor or the pharmacist your health care card. If you purchase other reimbursable items, such as eyeglasses or contact lenses, you can submit the receipt and have the funds reimbursed out of your HRA account. You can get a claim form or an HRA reimbursement form by contacting your health insurance company. Many of these forms are available online, so if you have Internet access to your account you can print the form right from your computer. Otherwise you can contact your insurer, or your human resources department if you receive health care at work, for the form you need.