Groups that currently have traditional health insurance can often save 30% to 40% with the HRA plan. The HRA, or Health Reimbursement Account has been around for a couple of years now, however the benefits are not widely known. It is a way to self fund some of the smaller expenses and reimburse the employee in the background so that as far as the employee is concerned, the plan looks, feels and works like his low deductible plan with co pays. Another option is the HSA or Health Savings Account plan. This type of plan allows for either the employer or the employee to put money into a tax free savings account that the employee has control of. That is why these are also known as self directed plans.

From the employee's point of view these plans give a lot of freedom as to how his insurance money is spent and the employee can take this account with him when he moves to a different employer. The funds stay in the account until they are used or at the option of the employee, he can take the money out after age 65. At that point he or she avoids the 10% penalty but must pay taxes. One might consider leaving the funds in the MSA account even after retirement and use it for medical expenses not covered by insurance and therefore avoid paying the taxes. Groups of 25 full time employees or more have another option in addition to the above, a split-funded plan. The split-funded plan is one step below a self funded plan and should be considered as a stepping stone to a self funded plan. The plan works much like the HRA plan explained above except for two major points. If claims are less than expected, the savings is returned to the employer. The other advantage is the ongoing reports showing claims history. While personal treatment information is not revealed to the employer because of privacy laws, the reporting shows the amount of the claims and the person making the claims.

This information my help the company get a better handle on controlling medical costs and perhaps using some of the saved costs to promote wellness and fitness programs. With the information learned from a split-funded program, companies over 100 covered employees may want to venture into the land of the self funded plan. Unless the company has real deep pockets, insurance companies take on losses over a pre-determined amount. It is generally recognized that taking this on without the backing of an insurance company is too risky. Consider the fact the even insurance companies spread the risk by purchasing re-insurance from other insurance companies to protect themselves against an unforeseen man made or natural catastrophe.

Richard Evans