Health Reimbursement Arrangement FAQs
A Health Reimbursement Arrangement (HRA) is an employer-provided medical reimbursement plan that:
- Is funded solely by employer
- Reimburses employee tax-free for “medical care expenses” (for individual, spouse and/or dependents)
- Funded up to specified dollar amount per coverage period (usually a year)
- Is non-discriminatory in reimbursement for all eligible employees
Benefits to the employer:
- Can pair with a higher deductible plan, which may help save on premium
- Helps provide quality benefits while controlling costs – you may avoid paying for coverage your employees don’t use
- This unfunded approach allows payments to be made from employer’s general assets
- Flexibly designed:
- Timing of HRA fund availability
- Amount of HRA
- Who pays first – employer or employee
Benefits to the employee:
- HRA can help offset increased out-of-pocket expenses of higher deductible
- Lower monthly premiums can reduce employee share of cost
- HRA reimbursements are tax-free
- Increases employee awareness of true cost of health care
- If allowed by employer, HRA rollover option encourages wise spending choices
How do HRAs and HSAs compare?
|
Health Savings Accounts |
Health Reimbursement Arrangements |
| Individually owned |
Employer owned |
|
Portable |
Specific to employer |
|
Funded before use |
Funded as needed |
|
Contributions made by employee, employer, or others on owner's behalf |
Funded by employer only |
|
Balance rolls over at year end |
Rollover optional |
|
Must be used with qualified HDHP |
Can be used with any health plan |
|
Can be used as a savings/investment vehicle for future medical expenses |
Remains employer asset |