HRA vs Employer Sponsored Health Insurance

Of all the benefits that an employer offers, health insurance is probably the one that employees value the most, and with good reason: health care in the United States is notoriously expensive, and a single emergency could saddle a patient with tens or even hundreds of thousands of dollars in medical debt. An employer-subsidized plan is a sensible option for employees. Not only does the employer pay at least 50% of the employee’s premium, but the remaining premium is tax-free and taken directly from the employee’s pay.

The Rising Cost of Employer-Sponsored Health Insurance

Unfortunately, in recent years, even those with employer-sponsored health insurance plans are feeling the pinch of rising healthcare costs. In the last five years, health costs for those who get health insurance through their work, many have seen their costs double! This outpaces inflation and wage increases. In fact, over the past decade the amount that the average family with employer-sponsored health insurance pays for health-related expenses has grown greater than twice as fast as their wages!

This increase is largely due to mandated coverages and the cost of prescriptions that the insurance company must cover for all their members, even before we talk about deductibles and co-insurance and out of pocket costs you as the member must pay before your health insurance fully kicks in. Sure, the employer is still paying a large portion of the premiums, but the amount that an employee must pay before they can actually use that coverage, not to mention what they pay in premiums, has increased. Also, many employers, not all, do not pay for spouse and children’s premiums. They only help pay for employee only, leaving their spouses and children in most cases unable to get Government subsidies because that family has employee coverage “offered”. Just being offered, whether you take the employer coverage or not, in most cases, you and your whole family will not be eligible for government subsidies. So, unless your employer is willing to pay at least 50% or more of your health insurance costs AND your spouse and children’s’ costs, having the insurance could potentially financially hurt your family. (Unless it’s considered “unaffordable” which in most cases this is not true).

Buying Health Insurance with HRAs

In June of 2019, the U.S. department of Health and Human Services, Labor and the Treasury published a final rule that will allow companies that don’t offer a group coverage plan to fund a special kind of health reimbursement arrangement called an individual coverage HRA. Rather than having an employer-sponsored health insurance plan, the employee can use the money from their ICHRA to purchase an individual health insurance plan on the public exchange.

Who Benefits from ICHRAs?

While ICHRAs may seem a little unconventional, they offer some real benefits to both employers and employees. For the employers, the money contributed to ICHRAs is tax-free, and while there is a minimum amount that must be contributed, it generally provides more flexibility. In most cases, you’ll only have access to the employer contribution, but not a government subsidy.

Employees also benefit from ICHRAs. Rather than being stuck with whatever health insurance plan their employer chose, they can actually talk to a health insurance agent about their health needs and how much money they have to work with and find a health insurance plan that works best for them. They’ll have more options to choose from, giving them the opportunity to choose a plan that fits their lifestyle, and will be accepted by their preferred health care provider.

Choosing the Best Health Insurance with Nevada Insurance Enrollment

The health insurance enrollment period for Nevadans is usually November 1-December 15th. Now is the perfect time to talk to a health insurance agent to get more information on individual health insurance plans and/or subsidies. At Nevada Insurance Enrollment, we specialize in helping Nevadans find the right coverage for their health needs and budget.