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Want To Know The REAL Cost Of A HRA? Before You Decide That €30% Utilization Is A Good Enough Guess’, Consider This Case:

Want to know the REAL cost of a HRA? Before you decide that ‘30% utilization is a good enough guess’, consider this case:

The group could save about $60,000 a year by going to a $5,000/$10,000 deductible policy, but wants a HRA that caps employee deductible and out of pocket expense at $1,250 single, $2,500 family.  Total contingent HRA liability would be $112,500, for this 10 single, 10 family employee group.  Your job is to estimate how much the HRA will cost- to see if it makes financial sense.  So, 30% utilization of that $112,500 would mean the HRA should cost about $33,750, right? 

Wrong.  The actual cost could be as high as $84,375 (75% utilization!) or as low as $14,062 (12.5% utilization), depending on employee age and HRA plan design.  These are real numbers, folks.  Based on nearly 20 years of HRA-specific actuarial data.  That 30% ‘guesstimate’ could be off by a whopping $50,625.  That’s 150% over budget: not a fun thing to have to explain at renewal.

You no longer have to guess!  AHR has created an online HRA Cost Calculator so that you can quickly and accurately design, price and propose HRA plans.  It’s easy!  You just plug in the numbers, and in a matter of moments, you can design different HRA plan styles, at different price points, and give your clients a true ‘apples to apples’ comparison against other health plans.  It’s fast, it’s fun, and best of all, it’s free!

Real HRA medical expenses depend on employee age and plan design.  It’s complicated.  So we put all the math and actuarial drivers into the HRA cost calculator for you.   The calculator makes it easy to test out different plan designs and find the one that will work best for your prospects or clients.

Let’s try an example.  This is a 44 employee group: they wanted to go with a $5,000/$10,000 deductible, $2,500/$5,000 coinsurance policy.  And they wanted to use the HRA to keep the employee total out of pocket at no more than $1,250 single, $2,500 family.   All of the 3 HRA plans below do that, but let’s see how much the HRA will cost under different plan designs.  

Here’s plan option 1: The HRA pays the first $2,500/$5,000 of the deductible at 100%. 

Then the remaining $2,500/$5,000 of the deductible we’ll pay at 50% (i.e, say the employee goes to the doc, and the charge is $100: they pay $50, and the HRA pays $50). 

Finally, the HRA pays the coinsurance at 100%.  Employee out of pocket maximum is as requested: $1,250/$2,500. 

But get ready for sticker shock: this plan will cost the group over $146,000 a year.  That’s $140.50 single/$371.38 family per employee per month, just for the HRA!  Ugh!! Now you see why it’s always a mistake to give first dollar coverage at 100%.  Oh, and if you do it with a HRA debit card, add another 10%.  Not a smart plan, so we’d better give it another shot.

 For Plan option 2, let’s try this:

A HRA deductible of $50/$100,

Then the next $4,000/$8,000 paid at 70%,

Then the plan pays 100% for everything above that. 

Employee out of pocket is still $1,250/$2,500.  But the cost is lower: $113,918. 

That’s better, but we can beat that, can’t we?  

For plan option 3: We’re going to pay the first $2,500/$5,000 at 50%.  Then we’ll pay the remaining deductible and the coinsurance at 100%. 

Very simple for employees to understand: they go to the doc, and the charge is $100, they pay $50, the HRA pays $50.  And once they have met their $1,250/$2,500 out of pocket maximum, they are done.  The HRA and insurance covers the rest. 

The cost of this plan?  $84,342.  We got it down to $83.21 single, $212.72 family, per month.

All of these plans have the same employee out of pocket maximums.  Yet Plan 3 costs 42% LESS than plan 1.  See what I mean?  Plan design matters.  So does accuracy.  That’s why this calculator is important.

 The AHR HRA Calculator is really easy to use: you just fill in the blanks, and print it.  And don’t forget to include your commission: you may add whatever you like, and it’s automatically included in the total cost figures at the bottom of the page.    Incidentally, it’s very easy to use this tool to create explanation sheets for employees- you just trim the excess rows and you have everything you need to present your HRA plan.

 The AHR calculators are available for free!  If you are already registered with us, just log in at and click on “HRA Cost Calculator”.  If you are a licensed agent and want to get registered with us, simply go here: – no obligation, and you won’t get spammed!  We’re here to help, not to be a pain in the neck.

As always, thank you for your support, and I hope this tool gives you a competitive edge in the market!

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