Health Reimbursement Arrangement (HRA)

What is an HRA?

A health reimbursement arrangement, or HRA, is set up and funded by an employer to help their employees pay for expenses eligible for reimbursement, meet their deductible and/or coinsurance and get them more engaged in their healthcare decisions.

Other features of an HRA

  • The fund is owned by the employer.
  • The employer decides which expenses are covered by the HRA.
  • Money given to the employee or healthcare provider for medical expenses is tax deductible for the employer.
  • The employee does not have to pay taxes on money they get from an HRA used for qualified medical expenses.
  • The employer decides whether leftover money in the HRA can roll over to the next year.
  • The money in an HRA can not be invested.

An HRA can be paired with any health plan (including HSA qualified health plan: special considerations may apply). The employer and employees can achieve lower premiums when the HRA is combined with a higher- deductible health plan. The HRA pays for expenses as they are incurred, depending on the type of HRA you select. If employees elect to have benefits assigned to the provider, the HRA plan administrator will pay the provider directly. If employees pay for services, the HRA plan administrator will pay employees directly.

HRA Advantages

  • Premium savings when paired with a higher-deductible health plan.
  • Employer HRA contributions may be tax deductible.
  • HRAs do not need to be prefunded.
  • HRAs are not portable to employees’ new place of employment.
  • The employer decides:
    • Who pays healthcare expenses first: the employer through the HRA or the employees
    • 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

Click here to view our Comparison Chart to see which works best for your business.