Designing a Principal HRA - Who Pays First

Example: A company offers a qualified HDHP with 80%/20% coinsurance, a $3,000 in-network deductible, a $6,000 in-network out-of-pocket maximum (OOP) and an HRA with 100% reimbursement. An employee incurs total in-network claims of $20,000 during a calendar year.

Employee first-dollar HRA

Employee First Dollar where employee pays first part of deductible

This model is the most economical for employers, and it also encourages a higher level of consumer-driven engagement by employees.

The employee pays the first part of the deductible
The HRA reimburses the next part of the deductible
Insurance then pays at 80% and the employee pays 20%
Upon reaching the OOP limit, the coverage pays at 100%

Employer first-dollar HRA

Employer First Dollar where employer pays next part of deductible

If an employer wants to offer a richer benefit package, or finds themselves in a job market where competition for quality employees is high, an employer-first design may be more attractive to the work force. This can also be a good first step to ease into a consumer-driven program.

The HRA reimburses the first part of the deductible
The employee pays the next part of the deductible
Insurance then pays at 80% and the employee pays 20%
Upon reaching the OOP limit, the coverage pays at 100%

Stackable HRA

Employee First Dollar where employee pays first part of deductible, employer reimburses the next part

Stacking a Principal HRA and HSA offers the best of both worlds—control for employers with flexibility for employees. Employees must still pay the first dollar, but now have more options and incentives around the method of payment.

The employee pays the first part of the deductible, either out-of-pocket or through their HSA or FSA
The HRA reimburses the next part of the deductible
Insurance then pays at 80% and the employee pays 20%
Upon reaching the OOP limit, the coverage pays at 100%

Please note that additional options for reimbursement percentages, insurance options and more are available in addition to those shown here.

Not a complete statement of the benefits, exclusions and limitations of the insurance described here.

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IN 17932

07/2006