Written by Michael G. Kirwan, ChFC, CLU
Published Summer 2009 in the New Jersey Union County and Morris County Medical Societies’ Newsletters
As we hurtle toward a National Health Insurance Plan and ever increasing Health Insurance Premiums, we would like you to be aware of certain Consumer Driven/Cost Savings Programs available to your practice.
HRA-Health Reimbursement Arrangement
A Program available to all eligible employers, used in conjunction with a Low/High Deductible Health Plan (not necessarily an HSA), which may also have “first dollar benefits”, such as prescription drugs and/or doctor co-pay’s.
The employer establishes a limit/threshold level of “Reimbursement”, typically not greater than the deductible, and the employee/participant is responsible for their Rx and doctor co-pay’s and all amounts, if any, in excess of the chosen level/threshold. The savings attributable to the High Deductible should be sufficient to not only cover the “Reimbursement”, but should also produce an overall healthy savings to the employer.
HSA-Health Savings Account
Similar to HRA’s, but “first dollar benefits” are reimbursed by making “Tax Deductible” contributions to an HSA/IRA Account, which is available to individual participant’s who make “Tax Free” withdrawals from their respective accounts to pay their qualified medical expenses, prior to meeting the chosen Low/High Deductible.
Unused contributions made to these HSA/IRA Accounts, by either the employer or employee, are rolled over year to year and accumulated to pay for future qualified medical expenses. Accumulated funds become an incentive for the employee to manage his/her health care, since unused funds may also be used to pay for Long Term Care and can ultimately be used as a Supplemental Retirement Plan. Contributions are “in addition to” any other Retirement Plan contributions. Individual Accounts belong to the participant.
Review a Health Savings Account Case Study.
NEW: Select carriers are now offering Fiscal Year HSA/HRA Deductibles.
Current plan deductibles are from January to December (Calendar Year).
Large Group (20+) Medicare Participants
Groups with 20+ fulltime employees (not insured’s) fall under TEFRA/DEFRA guidelines and are subjected to different grounds rules than the under 20 groups for purposes of Medicare eligibility/benefits. If your group employs 20 or more people, you must allow your Medicare-entitled members, and their spouses who are age 65 or over, to retain their group coverage as their primary insurance, with Medicare as the secondary payor.
If members over age 65 reject the group coverage, Medicare becomes the primary payer. However, for employees with spouses that are under 65, if you were to reject the Group plan, your spouse’s would be without coverage and we have already determined that most Individual Plans in NJ are too costly, even when pricing in the assumption of those 65 and over applying for Medicare A+B+D+ Supplemental.
*Age 65 HSA Plan participants would be able to continue to contribute and deduct their HSA contributions!