Direct Reimbursement Dental Plans
Direct reimbursement plans are a type of dental plan that companies can offer their employees. They are self-funded and allow workers to choose any dentist they wish. This saves your company money by ensuring that you’re only paying for benefits when they are used, instead of paying large sums of money into a plan that may never be used. This allows for businesses to provide the best care to their employees.
Historically, both dental and health plans have been treated the same. But since dental coverage is more predictable and often less costly than healthcare, more and more companies are taking advantage of direct reimbursement, either through a health reimbursement arrangement (HRA) or health savings account (HSA).
An HRA is an IRS approved, employer-funded benefit that reimburses staff for qualifying out-of-pocket medical expenses. Instead of offering dental insurance, you’ll typically give your team members a monthly allowance so they can get the dental services they need. You’ll then reimburse them up to their allowance amount. These reimbursements are tax-free.
Because you’re reimbursing your workers for their dental care, you don’t have to worry about pre-funding their accounts. Instead, you’ll only pay when an employee visits the dentist, which ensures you’re not wasting money.
There is also a limit to how much you can reimburse your staff each year, so you will also be able to ensure you’re not spending more than you can afford. For example, if you’re using a qualified small employer HRA (QSEHRA) in 2020, you can contribute up to $5,250 for each employee or up to $10,600 if you choose to include their family.
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HRAs are managed by you as the employer, but HSAs are handled by each employee. To offer HSAs to your staff, you must provide a high-deductible health plan. This will lower healthcare premiums and raise deductibles for your team members. Your workers, however, can use funds from their HSA to cover these out-of-pocket costs.
Your employees can deposit money into their HSA so that it’s available if and when they need it. One of the great things about an HSA is that your staff can maintain the account even if they leave your company. The funds also roll over each year, so they can have more financial security if a major dental or medical issue arises in the future.
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