Health Reimbursement Arrangement (HRA)
Candlefocus EditorA Health Reimbursement Arrangement (HRA) are employer sponsored benefits that enable employers to reimburse qualified medical and health-related expenses for their employees. Unlike HSA’s where employees fund the account, employers contribute to a HRA on behalf of their employees.
Typically, HRAs are employer funded benefits that are only available to employees of that particular company. Once an employee separates from the employer, the employee can no longer be enrolled in the HRA.
Using an HRA, employers can reimburse employees for certain medical expenses and insurance premiums that are considered qualified expenses under the Internal Revenue Code. By providing an HRA, employers can help alleviate their employee’s out-of-pocket health care expenses.
What can be Reimbursed through an HRA?
The types of qualified expenses that may be covered by an HRA can vary depending on the employer and is generally based on Internal Revenue Service (IRS) rules. Generally, HRAs can be used to reimburse health insurance premiums as well as expenses for prescription drugs, visits to the doctor, vision and dental care, and more.
Employers may also decide to limit certain expenses or provide specific instructions on how an HRA may be used.
Who Funds an HRA?
Unlike Health Savings Accounts (HSA’s) where employees fund the account, employers will fund an HRA on behalf of their employees. Employers determine how much to fund an HRA each year. Employers will generally keep a ledger of HRA funds and will reimburse expenses based on employees’ requests.
When Can an HRA be Used?
Employers can specify when HRA funds may be used or accessed by employees. Generally, once an employee is enrolled in an HRA, the employee can begin submitting eligible expenses for reimbursement. Employers may also limit when funds may be used or require the employee to have a specific balance before using funds.
Why Choose an HRA
HRAs provide employers flexibility in offering employees health care coverage. Employers can tailor their HRAs to meet their needs and employees’ needs. Many employers consider HRA a cost-effective benefits as employers fund HRAs so employees are not out-of-pocket for expenses. HRAs are also simple to set up and maintain.
Overall, HRAs are a great way for employers to offer employees comprehensive health care coverage while not significantly contributing to employer costs.