What is HRA?

HRA stands for Health Reimbursement Arrangement, which is something set up and funded by an employer. The purpose of an HRA is to help employees pay for expenses that are eligible for reimbursement, meet their deductible, and become more engaged in healthcare decisions. It can also be paired with any health plan and both the employer and employee can receive lower premiums when combining it with a higher-deductible health plan. Different HRAs cover different things, so it depends on which plan you choose as to what it actually covers.

FeaturesWhat is HRA?, Employer Advantage Group, LLC., Westborough, MA

There are quite a few different features to every health reimbursement arrangement. Some of the options available include:

  • The fund is owned by the employer.
  • The money in HRA can’t be invested.
  • The employer decides which expenses are covered by the HRA.
  • The employee doesn’t have to pay taxes on money they get from an HRA used for qualified medical expenses.
  • Money given to the employee or healthcare provider for medical expenses is tax deductible for the employer.
  • The employer decides whether leftover money in the HRA can roll over to the next year.
  • If employees elect to have benefits assigned to the provider, the HRA plan administrator will pay the provider directly.
  • If the employees pay for the services, the HRA administrator will pay the employees directly.


There are also quite a few advantages to attaching an HRA to your health plan for the employer and employee.

  • Employer HRA contributions may be tax deductible.
  • HRAs don’t need to be pre-funded.
  • They aren’t portable to employees’ new place of employment.

Employer Decides

Seeing as though the employer is funding the HRA, they can make a lot of decisions as to what happens with the money. The employer decides:

  • Who pays the healthcare expenses first, the employer or the employee.
  • The annual amount available to the employees.
  • Which expenses to reimburse through the HRA.
  • Whether or not to retain or roll over funds remaining at the end of the year.

There are many advantages and features that come with a health reimbursement arrangement. It can be very helpful if it is accommodating to your company. If you are considering adding it to your company’s health plan, feel free to contact the Employer Advantage Group, LLC., located in Westborough, MA. We can help you choose the right HRA for your company.