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What is a MERP?

MERP: An HRA by Another Name

A MERP is a Medical Expense Reimbursement Plan. It is the same thing as a Health Reimbursement Arrangement (HRA). Both terms can be used interchangeably, but HRA seems to be the more common term.

So what is a MERP? Basically it's just a way for employers to give tax-free money to their employees which can only be used to pay medical expenses. Normally, employees pay for their own doctor visits, medicine, etc. and then the employer reimburses them. The employer can contribute exactly the amount they want so the cost of a MERP doesn't increase from year to year.

MERPs are incredibly flexible so it's very difficult to say exactly how they should be used. Most companies that administer these plans offer them either as a way to reduce the cost of group health plans or as a vision/dental plan.

MERPs with Group Health Insurance

An employer can opt for a higher deductible group health insurance plan and reimburse employees for some of the out of pocket expenses below the deductible. This effectively allows employers to self-insure a portion of their group insurance plan using pre-tax dollars which leads to big savings without any change in coverage.

MERPs for Dental and Vision Coverage

MERPS allow employers to only reimburse certain types of expenses. If an employer wants to offer a vision/dental plan without buying expensive insurance, they can offer a MERP to their employees that only reimburses for visions and/or dental expenses. This allows the employees to know that they're covered for basic expenses without costing the company absurd amounts of money on insurance premiums.

MERPs with Individual Health Insurance

Money from a MERP can be used to pay for individual health insurance premiums. This means that rather than offering a group plan and a MERP, employers can just offer the MERP and employees can use that money to buy their own individual policies. This allows employers to offer great benefits without dealing with the sky-rocketing costs and constant headaches of insurance.

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