At the beginning of the 20th century, when most employees worked at large manufacturing plants, larger employers provided self-funded, self-managed, onsite medical care in the form of a company doctor. This developed into today’s system in which employers pay for employee medical expenses through self-insured or fully-insured health benefits plans. These came to be known as defined benefit healthcare plans in which employees receive a defined benefit, typically unlimited healthcare, at uncertain cost to the employer.
HRA’s Grew in Popularity as Deductibles Rose
In the 1960’s-1990’s, as deductibles and exclusions became more common in both self- and fully-insured health benefits plans, some employer’s instituted “arrangements” to reimburse employees for qualified medical expenses that were not covered by their health benefits plan. The federal government made these arrangements subject to ERISA (1974) and HIPAA (1996) to ensure that they provided equal benefits to similarly situated employees.
HRA’s with Annual Maximums Became Popular in the late 1990’s
In the late 1990’s, health reimbursement arrangements with annual maximums, called “defined contribution plans,” became more popular—especially to reimburse employees for non-critical medical expenses (e.g. weight loss programs or prescription eyeglasses) which consumers had a higher propensity to incur than expenses for illness.
HRA’s Formally Defined in 2002 and called Integrated Health Insurance Plans or IHIP
On June 26, 2002 the IRS issued Notice 2002-45 and Revenue Ruling 2002-41 which clarified the definition of Health Reimbursement Arrangements (HRAs) and defined the criteria under which IHIP’s or integrated health plans and HRA’s could be used.
2002-Sean Crisp introduces HRA concept to local clients
In May of 2002, Sean Crisp met CEO, John Nacol of Redwood Health Services and was introduced to the HRA concept but for company sponsored health plans. Sean Crisp would then help pioneer the original HRA concept for his own clients helping them design their own benefits and reduce overall plan costs at the same time. To date SCA has saved their clients over $10 million dollars in overall plan costs without sacrificing benefits.
2012-Sean Crisp & Associates introduces IHIP, or Integrated Health Insurance Plans for school districts
For the past 20 or so years, insurance agents have been trying to help employers manage costs, but have seen little success. For the most part, there is very little a broker or an employer can do because there are simply too many things outside of one’s control to control costs over time. So, as the whole industry has mastered the art of helping employers find better options, Sean Crisp & Associates has become the leader in utilizing integrated health insurance plans along with Health Reimbursement Arrangements (HRA’s) to control costs and improve benefits. In 2012, Sean Crisp & Associates was contacted by a local school district of about 355 members to review their trust benefit renewal package. Sean went to the drawing board and came back with the first IHIP plan for schools. He was able to match their benefits exactly and reduce their costs by over 40% in the first year. This equaled just over $750,000 in the first year alone which would eventually allow them to absorb the following year’s renewal increase. This has never been done since trusts have historically increased their rates by 10% year after year. At SCA, our IHIP programs are now able to compete with trusts in so many ways such as; overall lower costs, same or better benefits, same or better provider networks, multiple carrier offerings, multiple plan offerings, reduced participation requirement, and overall happier members. Healthcare cost increases are consuming dollars that could be used to raise wages. Employees have been also getting hit with higher contribution for health insurance. The key to our program is simple; create a shift that empowers the consumer.