Healthcare Reimbursement Plans & Flexible Spending Accounts

Every business owner would like to pay less taxes and provide better benefits to their valued employees.  A Healthcare Reimbursement Arrangement (HRA) and Flexible Spending Account (FSA) can do just that.

Healthcare Reimbursement Arrangement (HRA)

A Healthcare Reimbursement Account allows an employer to lower insurance premiums.  With this plan in place the employer selects an insurance plan with high deductibles and/or copays.  The employer then makes up some or all of the difference by offering an allowance to the employee to offset their costs.  Any unused monies remain with the employer, NOT the insurance company.

Our plan design experts will show you how to make this a win-win situation for the Business Owner and their employees.

Example of Company ABC’s HRA Savings:

In July of 2004 the vision plan with “carrier XYZ ” was cancelled.

Company saved $35,000/yr.

($5 / Individual & $10 / Family)

We replaced the vision insurance with a reimbursement plan offering a benefit of $200 per employee per plan year and $300 for those with dependents.  Employees have access to ALL vision providers of their choice (no networks) and better benefits (no copays).

From 8/1/04 to 6/7/05 claims experience was as follows:

                        $2,356.60           Employee claims

                        $1,103.09           Dependent claims

                        $3,459.69           Total Claims Year to Date(10 mos) 

$29,170                      Amount that would have been spent on monthly premiums ($2,917/month) if “carrier XYZ” was still in place.

Corporate Coverage saved COMPANY ABC 88.2% with a Healthcare Reimbursement Plan to help meet the needs of their employees!

MEDICAL

We changed office visit copays from $10 / Primary Care visits & $20 Specialist visits to $20 Primary Care and $30 Specialist visits; This SAVED approximately 2.25% on the total premium.  Using an annual premium of $1,000,000 the premium savings are $22,500 (or $1,874/month).

From 8/1/04 to 6/7/05 claims experience was as follows:

                        $3,370                         337 Office visits

$18,750                      Amount that would have been spent on monthly premiums ($1,875 / month).

Corporate Coverage saved COMPANY ABC 82% with a benefit plan design change and reimbursement program to help meet the needs of their employees!

CONCLUSION

For monthly premiums of $2,917 for the previous vision plan and $1,875 from the previous medical plan, $4,792 would have been spent on claims totaling $683 / monthly.

Flexible Spending Account (FSA) - This option may be included with a HRA plan or it may stand alone.

Flexible Spending Accounts allow employees and their dependents to pay for out-of-pocket medical and dental expenses not covered by health insurance plus dependent care expenses via payroll deductions on a PRE-TAX basis.

THIS MEANS TAX SAVINGS FOR THE BUSINESS OWNER BECAUSE PAYROLL IS REDUCED AND LESS PAYROLL RELATED TAXES ARE DUE (FICA & MEDICARE 7.56%).

The same benefits apply to the employee!  The employee decides how much of their salary should be set aside pre-tax to cover medical, dental, vision and dependent care costs.  The employee therefore pays LESS FEDERAL INCOME TAX, FICA & MEDICARE TAX!

Example

Tax Savings  $2,046!!!

FICA & Medicare Savings for Business Owner

$7,400 x 7.65% = $566.10