Stacking an HRA on Top of an HSA

The Birth of the Stack. 
When Health Savings Accounts (HSA) were passed into law, the legislation also created two new types of Flexible Spending Accounts (FSA) and Health Reimbursement Arrangements (HRA). You may be more familiar with one type than the other. We're now used to seeing limited-use or limited-purpose accounts for FSAs when HSAs are being offered. Limited-use FSAs cover dental, vision and preventative services and not medical expenses. The medical expenses need to be covered by the HSA.

A less familiar account is the post-deductible FSA or HRA. The deductible referred to in post-deductible is the minimum deductible required under a qualified high deductible health plan. In 2014 the minimum deductible level is $1250 for single coverage and $2500 ($1250/$2500) for other than single coverage (typically referred to as family coverage). Once an insured reaches the minimum deductible plan then a post-deductible FSA or HRA can pay expenses. In the case of a post-deductible HRA the point that an HRA begins to reimburse can be set anywhere at or above the $1250/$2500 level.

Here's an example: 
Some employers have incorporated the HSA along with the post-deductible HRA to buy higher deductibles such as $6,000 single/$12,000 family ($6000/$12000) deductible plan. The reduced premium frees up dollars to contribute to HSAs and fund expenses covered by the HRA. A typical example would be the plan deductible of $6,000/$12,000. The first $1500/$3000 could be funded by the employer to the HSA, the next $1500/$3000 could be the employee’s responsibility and the remaining $3000/$6000 could be paid by the HRA (employer money). Currently one of our groups has had a less than 20% loss ratio on the HRA portion saving thousands of dollars.

Of course whether this is an option for a group depends on the costs of the health plans and the experience of the group. Consult with your broker to determine if this is a valid consideration for your group.  

The Author: Roger Jorgensen, RHU, REBC

Marketing - HSA/HRA/FSA & COBRA

abgncs.com/HSAFSAHRA

rjorgensen@abg-mn.com