Individual HRA coverage can be the advisor’s friend
What do you want to know
- Through ICHRAs, employers can give employees money they can use to buy their own coverage.
- A challenge: Employees will need help finding, selecting and purchasing their own coverage.
- Retail advisors who have the right tools could be well positioned to provide this help.
For decades, the vast majority of the American workforce has been locked into employer-selected group health insurance coverage.
With the advent of Health Reimbursement Accounts – and in particular, the Individual Coverage Health Care Account in June 2019 – this stranglehold has been broken.
HMOs and PPOs still make up the majority of employer offerings.
Of employers offering some type of plan, two-thirds to three-quarters offer these traditional insurance options, according to the Kaiser Family Foundation’s Annual Employer Health Benefits Survey.
However, the category containing HRAs and high-deductible plans began to grow after 2019.
This means that financial advisors have the opportunity to become more involved with health insurance offerings from employers of all sizes.
Financial advisors already play an important role in managing programs such as 401(k) and executive compensation plans. They have proven their value and have established links with the management and human resources departments of companies.
More importantly, they already have the right alignment, in that health insurance is not health care – it is a vehicle for financial protection.
Insurance is not a doctor or a hospital or a treatment; it is financial planning that provides security and the safety net, nor is it access to health care since any consumer can consult a doctor without insurance.
What financial advisors lack, however, is expertise in the increasingly complex field of health insurance and knowledge of how various ancillary and complementary insurance products can minimize the financial risk of their clients.
Here are three things financial advisors need to know in order to increase their presence in the distribution of health insurance products:
1. Understand the employee value of a multi-faceted strategic approach.
For example, pairing a high-deductible plan with an HSA will reduce their fixed costs, providing the employee with a 30% tax break by paying for the HSA’s medical services, then augmenting that coverage with an accident plan to cover the first out. -pocket money.
Understanding the financial strategy of combining various insurance products enables advisors to protect their clients’ financial risk.
By understanding a client’s current needs, future usage, and how fixed and variable costs affect financial planning, financial advisors will be better able to help their clients manage the effects of healthcare utilization. health on their personal finances.
2. Understand the value for employers.
ICHRAs allow employers to reimburse employees, separated into specific categories, for qualified insurance premiums or insurance premiums and out-of-pocket healthcare costs.