Employer sponsored health insurance is a cornerstone of healthcare coverage for a large number of American workers. Group coverage spreads the risk for insurers and gives employees access to affordable health care insurance. Health reimbursement accounts and open access plans enable employees to take advantage of group health insurance.
With health reimbursement arrangements, employees enjoy health insurance without any deductions from their salaries because employers provide 100 percent of the funding for these plans. Employers place money in special accounts to finance the out-of-pocket medical costs that employees might incur. TASC, a provider of third party administration services, says on its website that the employer "sets aside a specific amount of pre-tax dollars for employees to pay for health care expenses on an annual basis." In addition to being funded solely by the employer, the plan can provide benefits "for substantiated medical expenses only," TASC says.
According to TASC, all employer contributions to HRA plans "are 100% tax deductible to the employer, and tax-free to the employee." The flexibility of HRA plans gives employers control over the benefits they provide employees, and employees get the benefit of lower insurance premiums and access to employer-contributed funds for health expenses. The employer’s contributions to HRA plans don’t count in the employees’ gross income, and reimbursements for qualified medical expenses might be tax-free. Qualified medical expenses include payments for treatments provided by doctors for illnesses, as well as the cost of equipment and supplies for these treatments.
Open access plans are managed care health insurance plans that encourage members to get preventive checkups and early treatment. Like other managed care plans, OAPs try to lower out-of-pocket medical expenses. However, members don’t need to select a primary care physician. Many OAP networks are split between two networks, often referred to as Tier I and Tier II. In Tier I, the insurer typically covers 100 percent of benefits after members make copayments. There is reduced benefits coverage at Tier II, often 90 percent after members make copayments. Members receive coverage for preventative services such as physical checkups and pediatric visits at no additional cost. There’s also a third level, Tier III, that lets members visit out-of-network providers but at even lower benefits coverage.
Advantages of OAP
Open access plans let members mix and match providers and services for better services. For example, members can use the services of a doctor from Tier I and receive care at a Tier II hospital. The OAP plans allow members to choose care from any provider, which means members can go to out-of-network providers -- albeit at significantly reduced benefit coverage. Annual deductibles for Tier I and Tier II services are cross accumulated. This means deductibles paid for services in either of the tiers is applicable to the other.
- Internal Revenue Service: Publication 969
- TASC: Health Reimbursement Arrangement
- Internal Revenue Services: Medical and Dental Expenses
- Illinois Department of Central Management Systems: Open Access Plans
- Illinois Department of Central Management Systems: Open Access Plans (OAP) Benefits
- University of Illinois: Managed Care Plans