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.

How will an HRA benefit me?

Almost every American incurs some medical expenses throughout the year that are not reimbursed by insurance, and an HRA is designed to reimburse employees for some of these expenses.

An HRA is totally funded by the employer. The employer decides (1) how much he wants to contribute to the HRA and (2) what expenses he wants to pay for. After that, you have control on how and when you spend the money. After incurring the eligible expense, you will submit a claim for reimbursement.

Your employer has the option of allowing all or a part of any money unused at the end of the plan year to be carried over into the future years or be available when you retire. By spending wisely, you can accumulate funds for a possible illness in the future.

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What happens if I don't use all the money in my HRA?

Your employer has the option of allowing you to carry over all or a portion of the unused funds for use in future years or at your retirement. Healthy people who do not have many expenses now can save up for possible future expenses.

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How much will an HRA cost me?

The regulations do not allow employees to contribute money to the HRA. It is completely funded by the employer.

In a "linked" HRA, you may be required to participate in the group health plan in order to participate in the HRA. In "stand-alone" or "unlinked" HRAs, you are not required to participate in any health plan.

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What will an HRA pay for?

It depends on the HRA. An HRA can reimburse for the same expenses (except long-term care expenses) that you can deduct for on your income tax if you itemize. However, your employer has the option of limiting the eligible expenses for a specific HRA.

For instance, an HRA can be structured to pay only co-pays and deductibles under your group health plan, or it can pay just vision and dental expenses. At times, you will have to pay a certain percent of the expense while the HRA reimburses the remainder.

You should receive a Summary Plan Description describing the HRA(s) and your rights and responsibilities as a participant.

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Will an HRA cover my spouse and dependents?

Typically, your spouse and dependents will be covered by an HRA. However, your employer has the option of restricting the coverage to only apply to the employee although this is rarely done.

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How do I tell the employer that I want an HRA?

The easiest way is to refer your employer to this website. There is a special section for employers, explaining what an HRA is and how it would benefit the employer.

Your employer may appreciate hearing about this. HRAs are one of the hottest topics in employee benefit administration today. Many employers are looking for ways to continue providing healthcare to the employees, while maintaining a reasonable budget and some control over expenses.

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Can I do an HRA myself, without employer assistance?

No. An HRA is entirely employer sponsored and funded. Individual employees are not able to initiate an HRA plan.

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