With dramatically increasing health benefit costs many companies either choose not to offer health benefits or are dropping their group health insurance. There is another option and it is a better way of providing cost effective health benefits and insurance.
The Health Reimbursement Account (HRA) is quickly gaining the option of choice. With this arrangement the employer can choose to contribute a fixed dollar amount for each employee. The employee then chooses how to allocate those among a choice of health benefits. This choice can include an individual health insurance policy. The contributions are tax deductible to the employer and non-taxable to the employee. There are several advantages to this approach and that is why it is gaining steam.
1. The employer becomes a contributor rather than a sponsor. When sponsoring insurance there are many consequences. First, the government mandates the contribution. This contribution automatically goes up with each premium increase. Second, the employer tends to raise the deductible and reduce benefits on an annual basis in an attempt to control costs. Employees are never happy about this and it affects morale.
2. By becoming a contributor rather than a sponsor, the employer no longer "picks" the health insurance plan for the employee. Each employee chooses their own plan based on their needs. In many cases,depending on the employer contribution level this can require little to no out pocket cost for the employee.
3. The employer contribution is tax deductible and therefore reduces the FICA taxes as well. The employee benefits as well as the contribution are tax free and effectively reduce the cost of their health benefits.
4. Employees are happier when they pick health insurance plans that fit their situation. The burden of controlling cost is shifted to the employee as they can decide how to they want to deal with premium increases with regard to their own needs. They can also choose cost effective supplemental plans such as critical illness or accident plans the further stabilize and control their costs.
5. If the employer chooses too, it is easy to outsource the administration. That allows less employer time involved in picking a plan, administering it and then dealing with the payroll.
There are many of other advantages but the greatest one of all is that employers can get on with the business of "running" the business rather than feeling like they are in the health insurance business.
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Best Insurance Design that specializes in helping people take control of their health benefits. First we help employers define and control their health benefits spending. Second we assist employees in choosing how to spend their health benefits dollars wisely. This is done in a unique and different way from any approach out there.
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