10/1/2007
Small Business Owners Can Set Up HRAs
by Larry Brian, Center Director, UA Fayetteville SBDC
As health insurance premiums soar many small business employers are turning to "consumer-driven" health plans to motivate employees to use medical services wisely and to keep a lid on health costs.
Health reimbursement arrangements, or HRAs, are one possible way to do that. In an HRA, employers set aside money to reimburse employees’ deductibles or qualified out-of-pocket medical expenses up to a predetermined amount. HRAs are coupled with high-deductible insurance plans. Employees can generally roll unused money over from year to year, though the money technically belongs to the employer.
Since employers are partially self-insuring their employees’ medical costs, they can buy a more limited health insurance plan and cover some health care costs on an as needed basis. If the employee leaves the money reverts back to the employer. Contributions to HRAs are tax deductible.
Some insurers still don’t offer HRAs, but many third party administrators do. Please contact a health insurance provider for details.
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