Medicare & HRAs, the perfect pair to save you money on retiree coverage

As health care costs continue to soar, many companies seek alternative solutions to provide employee coverage, while managing costs and limiting their liability.  Some businesses are moving retirees to Health Reimbursement Arrangements (HRAs) so they can continue to provide them the coverage they need.

HRAs are employer-sponsored and employer-funded arrangements, which provide retirees tax-free reimbursements for eligible expenses like Medicare premiums, co-pays, deductibles as well as vision and dental expenses.  Moving retirees away from a group plan saves on expensive monthly premiums and out-of-pocket costs. 

For example, monthly 2017 Medicare premiums are approximately $353, which includes Medicare Part B ($134), Medicare Part D average rates ($61) and Medicare Supplement Plan F ($158). 

On average, monthly group health plan premiums based on the metallic tier of coverage for a 65-year old employee range from $765 (Bronze) to $1,160 (Platinum).  The HRA can save employers as much as $806 per month per employee!  Annual savings per Medicare-eligible employees range between $6,554 and $11,287!

Aside from the obvious cost savings, there are additional advantages to businesses when retirees are moved to HRAs: 

• all employer contributions to the plan are 100% tax deductible to the employer, and tax-free to the employee. 
• these arrangements allow companies to control health care costs by establishing a limit on contributions, which in turn, allows them to clearly forecast costs. 
• it relieves a burden from administrative personnel and allows them more time to handle other important issues.

Interested in learning more about HRA’s for your Medicare-eligible employees?