Should I just drop group health insurance and offer an HRA instead?

In an effort to dodge some of the rules and challenges that are part of Health Care Reform, some “slick” sales organizations are encouraging Colorado employers to just “get out the health insurance game” and offer a Health Reimbursement Arrangement (HRA) instead. Here is one of the marketing e-mails that we just received.

Their pitch sounds appealing — just set up a fixed dollar benefit for employees and then let employees pick their own individual health insurance policy. They say that the employer can still deduct this contribution as a business expense, and the benefit is also tax free to the employee. Sounds great, huh? But, there are a couple problems with this approach:

1. Currently, and for the remainder of 2013, individual health insurance plans are still medically underwritten. This means that there is no guarantee that your employees and/or their families will qualify for an individual health insurance plan. In fact, some employees may find out that they are uninsurable. Ouch.

2. Even though this “pitch” claims that by setting up an HRA, the employer is “getting out of the insurance business”. That is not just misleading…it is dead wrong! By setting up an HRA and paying individual health insurance premiums through the HRA, the employer is actually jumping even deeper into the health insurance business. Why? Because HRAs ARE HEALTH PLANS and THEY ARE SUBJECT TO THE SAME RULES AND REGULATIONS AS ANY OTHER HEALTH PLAN OFFERED IN THE STATE OF COLORADO. Specifically:

“But my insurance agent said that paying for individual health insurance through an HRA is a good idea.”
Let me be direct. Fire him or her. They are just looking for a way to sell a bunch of individual health insurance policies to your employees OR they are uninformed. In either case, if they are doling out this kind of advice, they are not worthy of your business. By running individual health insurance premiums through an HRA, they are placing you AND your employees in a very precarious position. A position that puts you deeper into the health insurance business than you would ever care to be. And, in a position, that creates substantial (and, potentially business killing) liability.If you want sound advice, without the spin, and without putting your business and your employees at substantial risk, give us a call. Our mission is to help you (and your employees) to protect your health and wealth. We won’t recommend or implement anything that would put you at risk like this. Moreover, please know that we are committed to staying on top of the changes that are coming in our industry.

Bottom line…