About HRAs, Health Reimbursement Arrangements

What is an HRA?

A Health Reimbursement Arrangement (HRA) is an employee benefit plan designed to help offset unreimbursed medical expenses incurred by the employee (and dependents). The employer provides the funds to reimburse the employee by contributing funds to an HRA. After the expenses are incurred, the employee can submit a claim for reimbursement.

HRAs can vary greatly in design, but are developed basically for the same purpose—to reimburse the employee for expenses not covered by any other health plan. For example, one HRA can be designed to cover all or a portion of the deductible on a High Deductible Health Plan (HDHP), while another is designed to reimburse the employee for dental and vision expenses. It just depends on the employer's goals for providing employee benefits.

An HRA can be "linked" or "unlinked." A linked HRA is tied to an health plan; you have to participate in the health plan to be eligible for the HRA. An unlinked (or stand-alone) HRA is set up to pay certain expenses, such as dental or vision expenses, without any connection to an insurance policy.

Advantages of HRAs for employers:

Qualified reimbursement claims are tax-deductible for the employer.
Employers know their maximum expense and cost to their health care benefit.

Advantages of HRAs for employees:

If the employee pays for a qualified medical expense, the reimbursements may be tax free.
Unused funds in the HRA can be rolled over to the next year for reimbursement.
HRAs can be offered with another employer based Health Plan like a Flexible Spending Accounts (FSAs).
Employees do not have to be covered under any other health care plan like a High Deductible Health Plan to participate.
Contributions made by the employer can be excluded from employees' gross income.
HRAs can be tailored to meet the employee' needs or to their families' specific needs as opposed to a standard company wide plan.

An HRA gives employees additional choices and greater control over health care expenses, and provides them with financial assistance when they incur an eligible medical expense. Also, HRAs give the employee the option of selecting the health plan that is right for them. Health Reimbursement Accounts / Arrangements do not limit your access to healthcare or prevent you from going to the doctor in anyway.