Principal Health Reimbursement Arrangements (HRAs)
Help control rising health care costs by giving employees more power in their health care decisions! Plus, the Principal HRA offers powerful design options, simplified enrollment and coordinated claims, freeing you from many administrative hassles.
HRAs are coupled with either a high deductible health plan (HDHP) or conventional PPO insurance to provide coverage that serves the needs of both employers and employees. When combined with an HDHP, costs are usually lower than most conventional designs.
- How an HRA works
- Advantages of a Principal HRA
- Advantages to employees
- How can HRA funds be used
- What companies are eligible
How an HRA works
An employer makes an annual amount available to employees through an HRA. The employees use a combination of their own money and the HRA to satisfy their insurance deductible. Depending upon the design, if the employees don‘t use the entire amount, anything remaining can roll over for use in the future. If employees spend HRA dollars wisely, they may reduce their out-of-pocket expenses, which gives them incentive to engage in consumer behaviors that reduce health care costs.
Advantages of a Principal HRA
Employers gain many ways to design a benefit program that gives them control, plus a number of ways to save on costs.
- Control
- Employers set the annual contribution amount.
- Employers choose who pays first – the HRA or the employees.
- Employers choose a design with or without rollover.
- Employers choose the maximum amount that the HRA can accumulate at any one time.
- Employers choose the percentage at which the HRA will reimburse claims.
- Employers choose the insurance design to pair with the HRA.
- Employers can also stack an HRA with an HSA or FSA
- Savings
- Reimbursements made through the HRA are tax-deductible to employers.
- The Principal HRA only reimburses expenses allowed by the medical coverage. Many competitors reimburse as allowed by IRS Code 213(d), which increases cost exposure.
- You retain remaining HRA benefits if an employee leaves your company. There is no cash-out option for employees, limiting cost exposure.
- An HRA/HDHP combo can lower your cost of providing medical coverage.
- Employers only provide what is needed to reimburse actual claims when they are paid.
- The true power of an HRA is that it motivates employees to think seriously about choices such as brand name vs. generic drugs or whether to use emergency rooms in non-emergency situations. This may help lower health care costs in the long-term.
Advantages to employees
- Employers contribute to the HRA - giving employees yet another benefit.
- Reimbursements are not considered taxable income for employees.
- Reimbursements help employees minimize their out-of-pocket expenses.
- Wise use of HRA dollars can limit employees’ cost exposure. In fact, it’s possible an employee could have no out-of-pocket expenses at all.
- While combining an HRA with an HDHP can lower insurance costs for the employer, it can lower the amount employees pay for coverage, too.
How can HRA funds be used?
HRA funds can be used to pay for medical expenses allowed by the insurance coverage including deductibles, coinsurance and copays.
What types of companies are eligible?
HRAs are available to groups with 10 or more covered lives. When employees are enrolled in Principal Life medical coverage they can be automatically enrolled in the HRA.
For more information
- Contact your insurance broker
- Find a local Principal Life sales office
Not a complete statement of the benefits, exclusions and limitations of the insurance described here.
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| IN 17455-1 | 07/2006 |
