Health Reimbursement Accounts (HRAs)

Paper Summary:

This paper examines the advantages and set backs of HRAs and shows that in implementing an HRA plan, companies need to asses whether they will offer HRAs in conjunction with other plans, how much to contribute to each participant's HRA, how much of the account can be rolled over from year to year, how to teach employees to manage their own medical expenses, and what impact an HRA will have on health care costs.

From the Paper:

"For about seventy-five to eighty percent of Americans, a $1,000 fund for single employees and a $2,000 fund for employees with families will be sufficient. However, those who have chronic conditions will quickly exhaust their funds. Some also worry that employees may forgo needed medical care once the money in their accounts has been spent. Therefore, it is prudent to at least supplement an HRA with a high-deductible medical plan, with annual employee contributions ranging from $1,000 to $4,000. Deductibles kick in after the HRA has been tapped out and once the deductible has been met, the coverage then rolls over the supplemental medical plan. Still other experts advise large companies to continue to offer traditional plans such as HMOs and PPOs on their health-benefits menu in addition to an HRA plan."

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