Out-of-pocket health care expenses are a significant and growing cost for Americans. Last year alone, Americans spent $2 trillion on health care. Out-of-pocket health care expenses accounted for $250 billion (12.5 percent) of all health care expenditures. This number is expected to rise to $421 billion within the next 10 years.

There are different ways to solve this out-of-pocket expense dilemma: Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), and Health Reimbursement Accounts (HRAs). But these plans are not right for all companies.

First Rehab Life offers an alternative to these accounts: Group Medical Reimbursement Plans (GMRPs).

Options

A Flexible Spending Account (FSA) is an employer-sponsored program available through a cafeteria plan. General assets of the account are held in trust by the employer, and the employer controls and owns the account. There is no portability of the account, and no requirement for a High Deductible Health Plan (HDHP). All employees who meet the eligibility requirements of the employer may participate. Funding is typically done by the employee, however, employer contributions may be made.

A Health Savings Account (HSA) can be established by an individual, an employer, or a combination of the two. The funds are held in trust or in a custodial account, but the employee has control and ownership. The account is portable, but requires participation in an HDHP. Unlike the FSA, there are statutory limits. Unused funds can be carried over from year to year.

A Health Reimbursement Account (HRA) is an employer-sponsored benefit plan. General assets of the account are held in trust by the employer, and the employer controls and owns the account. There is no portability, and no requirement of participation in an HDHP. All employees that meet the eligibility requirements of the employer can participate.

But these plans are not right for everyone. Some corporate owners may not be eligible. Others may not wish to extend additional benefits to all employees or may wish to preserve benefits for certain workers when they cut health program expenditures. Still other corporation owners may have out-of-pocket expenses that exceed the maximums for these plans.

An Alternative

If thats the case, another solution may be an insurance policy that allows a company to extend coverage only to selected classes of full-time employees " e.g., key executives or administrative personnel. A Group Medical Reimbursement Policy (GMRP) is a fully insured excess medical policy that covers most out-of-pocket expenses created by copays, deductibles, exclusions, and limitations in primary health plan and ancillary coverage. Premiums are paid by the company on a noncontributory basis. Eligibility is determined by class. There is no portability, but participants in the plan may be eligible for COBRA. There is no requirement for participation in an HDHP and no carry-over of funds. There are no statutory benefit limitations. Unused portions of premium are returned to the company upon reconciliation.

This plan could work well for an executive who does not have access to other administered plans but accumulates out-of-pocket expenses (e.g., copays for doctors visits, prescription drugs, eye glasses, braces, etc.). Additionally, for an executive who incurs substantial out-of-pocket expenses due to a serious, ongoing medical condition, this plan is a viable solution.

How It Works

Because a Medical Reimbursement Policy is not a use-it-or-lose-it program like traditional health insurance, it can be a cost-effective way to reimburse most noninsured or limited medical expenses. Premiums paid for this insurance policy may be deductible, and the benefits received by insured individuals may be exempt from taxable income.

Following the end of the calendar year, all risks are pooled by specific benefit amount and retrospectively experience rated " with the potential for premium refunds. The annual retrospective premium is based on the pooled claim utility level for each specific benefit amount (not each policy group) plus First Rehab Lifes retention. In no case will an insureds liability exceed 90 percent of a policy groups coverage.

A GMRP generally provides at least some limited coverage of many medical expenses, including coinsurance payments, prescription drug costs, health insurance deductibles, pre-existing conditions, private duty nursing, and dental and orthodontia, among other common medically-necessary and physician-ordered expenses.

For many corporations, implementing a GMRP could solve many of the out-of-pocket expense concerns of a great number of their employees.

For more information on First Rehab Life, visit www.firstrehab.com.

Bradley Hamsher, RHU, is regional sales director for First Rehab Life and has been in the financial services industry for 21 years.