One of the most frustrating situations an employer can face during health plan renewal is when an insurance carrier places a laser on an employee.
A laser can significantly increase an employer’s financial risk by excluding one employee from the standard terms of the group health plan or requiring substantially higher rates because of that individual’s expected healthcare costs.
For employers with a small number of employees, a single laser can make maintaining a traditional group health plan difficult or even financially impractical.
Fortunately, there may be a solution: an Individual Health Reimbursement Arrangement (Individual HRA) from Empower can allow an employer to provide healthcare assistance specifically for the affected employee while maintaining a more sustainable overall benefits strategy.
What Is a Health Insurance Laser?
A health insurance laser is a condition placed by some insurance carriers on a specific employee during underwriting or renewal.
Instead of applying the same coverage terms and rates to every employee, the insurer may identify one employee as having higher-than-expected healthcare risk and apply special pricing or restrictions.
A laser may result in:
Higher premiums associated with one employeeSeparate underwriting treatment for one individualIncreased employer healthcare costsDifficulty renewing a small group health plan
Lasers are more common among smaller employer groups because one employee’s claims experience can have a much larger impact on the overall risk pool.
What Should an Employer Do If an Employee Gets Lasered?
When an employee is lasered, employers typically have several options to consider:
Accept the Laser
The employer can accept the insurer’s terms and continue the existing group health plan.
This may be the simplest option, but it can create significant additional costs depending on the size of the laser and the employee’s healthcare needs.
Shop for Another Insurance Carrier
Employers may look for another carrier that is willing to offer coverage without the same underwriting restriction.
However, for small groups, changing carriers does not always solve the problem. Another insurer may apply similar underwriting rules or the employer may face limited options.
Use an Individual HRA Arrangement
In certain situations, an employer may be able to remove the affected employee from the group health plan structure and provide healthcare assistance through an Individual HRA arrangement.
This allows the employee to obtain individual health coverage while the employer provides reimbursement assistance for:
- Individual health insurance premiums
- Qualified medical expenses
- Other eligible healthcare costs according to the plan design
This approach can help the employer manage the impact of a laser while still providing valuable healthcare support to the employee.
How Does an Individual HRA Work for a Lasered Employee?
An Individual HRA is an employer-funded reimbursement arrangement established for an eligible employee.
Instead of the employee remaining on the employer’s group health plan, the employee obtains individual coverage and submits eligible expenses for reimbursement.
The employer determines:
- The reimbursement amount
- Which expenses are eligible
- The plan rules
- How the arrangement is administered
The employee then receives reimbursement according to the terms of the HRA.
Can an HRA Be Set Up for Only One Employee?
In certain circumstances, yes.
One of the unique advantages of an Individual HRA arrangement is that it may allow an employer to provide reimbursement benefits to a specific employee rather than an entire workforce.
This can be useful in situations where a single employee creates a disproportionate impact on the employer’s group health plan costs.
However, the arrangement must be designed carefully to comply with applicable regulations and nondiscrimination requirements.
Why Would an Employer Consider This Approach?
An Individual HRA solution may help employers:
Control Health Plan Costs
Instead of absorbing the full impact of a significant laser, the employer may be able to provide a defined reimbursement amount.
Continue Supporting the Employee
A laser does not mean the employee has to lose access to meaningful healthcare assistance.
An HRA can provide financial support while allowing the employee to choose coverage that fits their situation.
Create More Predictable Budgeting
The employer can establish a defined reimbursement amount rather than facing unpredictable group health plan costs.
Is an Individual HRA the Same as an ICHRA?
No.
An Individual Coverage HRA (ICHRA) is a formal type of HRA that allows employers to reimburse employees for individual health insurance premiums and other qualified expenses.
An Individual HRA arrangement used for a lasered employee may involve specific plan design considerations depending on the employer’s situation.
Because these arrangements involve healthcare regulations, employers should work with an experienced HRA administrator to determine the appropriate approach.
How Empower Helps Employers With Individual HRA Solutions
When an employee is lasered, employers often need a solution quickly.
Empower helps employers evaluate and administer HRA solutions designed to provide healthcare reimbursement options while managing benefit costs.
Our team assists with:
- HRA plan setup
- Compliance support
- Reimbursement administration
- Employer guidance
- Employee support
We help employers find practical benefit solutions when traditional group health plans become challenging.
Have an Employee Who Has Been Lasered?
A laser does not always mean an employer has to accept significantly higher costs or eliminate valuable healthcare benefits.
An Individual HRA solution may provide another path forward.
Contact Empower to discuss your situation and learn whether an HRA approach may help your organization manage a lasered employee.
