Direct reimbursement refers to a dental plan that companies can offer its employees. It saves the company money and provides the best care to employees. Under this plan, companies only pay for the benefits they receive instead of paying large sums of money into a plan that is never used.
Historically, both dental and health plans
were treated the same, but since dental coverage is more predictable and often
less costly than health care, more and more companies are taking advantage of
direct reimbursement, either from a health reimbursement arrangement (HRA) or
health savings account (HSA).
Health reimbursement arrangements are mechanisms that allow employers to contribute to a fund. Then employees are reimbursed for medical expenses that aren’t covered by the plan. While there is a maximum reimbursement amount for each year, qualifying medical expenses are tax free.
Each HRA can be tailored to match the needs of that company, allowing it to be structured in a way that gives the employer confidence that money isn’t being wasted. Options include up to four tiers of deductibles and establishing a percentage that the employee and employer are responsible for, sharing insurance costs between the two.
In contrast to how HRAs are managed by employers, health savings accounts are owned and managed by the employee. This includes contributions.
In order to offer an HSA to employees, you must also offer a high deductible health plan (HDHP). These have lower premiums but higher deductibles, which can use funds from the HSA for the out-of-pocket costs.
A few of the main advantages of having an HSA is that employees can maintain the account even if they change employers and funds roll over from year to year, providing another avenue for sustained financial security for those who use it as such.