Here in the Vermont office of OneDigital, we are lucky enough to have a Health Reimbursement Account expert on our staff. Brent Lamell came to us after six years of working at a large national FSA/HRA administrator. He is our go-to source for information on these important benefits. Recently, we asked him to share his thoughts on HRAs (also called personal care accounts) and how they can benefit both employer and employee.
Why would an employer want to offer a Health Reimbursement Account?
BL: The first answer you usually get with this question is that there could be a tax benefit for employers who offer these benefits to their members. However, one of the less considered benefits for the employer is employee attraction and retention. As an employer, your benefits resume is looked over by a potential employee as much as, if not more than, you looking over theirs; this is a very big part of the decision process if an employee is thinking about leaving their employer. Benefits are weighed as much as pay and, in some cases, are considered more important. In my opinion, an employer is going to have an easier time attracting and keeping good employees if the benefits show themselves off as just that...BENEFITS. Giving employees tax-free money to use on health care can be a big draw.
What is the advantage to the employee?
BL: The main advantage for the employee is that the funding in the health reimbursement account is 100% employer funded. Health care can easily run up thousands of dollars very quickly and not everyone has the ability to cover those costs with (or lack of) funds just sitting in their bank account. At present, 40% of Americans live paycheck to paycheck, meaning when unplanned medical expenses arise, they are unprepared and it could quickly become a financial catastrophe. Having a personal care account will help relieve that financial burden and will allow the employee to focus on healing, rather than worrying about how they are going to pay the bills.
Why do you think some employers DO NOT offer this benefit?
BL: I really think it’s the lack of knowledge about these accounts. If an employer doesn’t know how an HRA can benefit both them as much as the employee, they are not going to deal with it. All they see is another thing they have to deal with, one more enrollment form they have to track down. Maybe years ago that was a valid argument. However in these days of employee and employer portals, it’s almost easier to set up a member with a personal care account than it is to switch your quarterback on your fantasy football league.
What is the most surprising scenario you’ve heard about health reimbursement accounts?
BL: I was working in the Member Service Department at [an HRA administrator], answering member questions and concerns. I had been working there for about nine months when I received a simple call from a member asking for her balance. Her employer sponsored a very generous plan and I told her she had an available balance of $5000.00 on a card for use for medical deductible expenses. She thanked me for my time and quickly hung up. That same day, hours later I received a call from the same woman a little frustrated and concerned about why her card was declining. I reviewed her balance again with her and assured her that her card was very active. As I was reviewing her transaction history I noticed that her card was declining for roughly $3000.00 at Sears. When I asked her what she was trying to purchase, her response was simply “a dishwasher.” I explained to her that as helpful as a dishwasher is it most likely will never be medically necessary, let alone applied towards her deductible as her plan required. I also set up a time for us to go into deep detail on what her plan covered and how best to use it.