What Is A Health Reimbursement Arrangement?

A reimbursement is a compensation for money that you have already spent. When you go on a business trip for work, you sometimes get a reimbursement for your expenses, plane tickets, and hotel bills, but you still have to pay for other none work-related expenses; like if you decide to go to the movies while on the trip. Health reimbursement arrangement (HRA) is an account set up by your employer. It's a health reimbursement account setup to pay for your share of health care costs. HRA is customarily paired with a high-deductible insurance plan and can sometimes be offered as a stand-alone benefit.

Your employer provides an amount of money to your HRA annually for your benefit. Unlike other health spending accounts, your employer is the only one that can fund your HRA account. Your employer owns the account. When you visit the hospital, the funds in your HRA is used to cover all eligible expenses. Your doctor will automatically get paid from your HRA account for such expenditures. The eligible expenses covered are frequently decided by your employer, but HRA’s typically include:

  • Prescription drugs and insulin
  • Medical costs: Co-pays, Co-insurance, and deductibles
  • Dental costs: cleanings, X-rays, and braces and exams
  • Vision costs: exams, eyeglasses, contact lenses and supplies, and laser eye surgery
  • Professional services: chiropractic, physical therapy, and acupuncture services
  • Over-the-counter health care items: pregnancy test kits, bandages, and blood pressure

Some Health Reimbursement Arrangement Facts:

I already have health insurance can my HRA pay for my premiums?

HRA's are not set up to pay for health insurance premiums. The types of medical expenses you can use your HRA for will be decided by your employer. These medical expenses cover most medical care, dental, vision, and over-the-counter medications. For more information on adequate medical expenses, visit the IRS website.

How are HRA funds allocated?

The way you allocate the funds primarily depends on your plan design. You might receive a debit card to pay for expenses, or you might have to pay cash for your expenses and get a reimbursement later.

What if I use up all my HRA allowance?

If you run out of funds in your HRA before the end of your annual allocation, you will have to pay any extra medical costs by yourself. However, if you have funds left over, your employer might let it roll over to the next year.

What are the benefits of HRA?

  • HRA have benefits that will help you save on health care costs.
  • Affordable: Premiums on policies offered with HRA are commonly less than other plans.
  • No Contributions: Your employer funds your HRA entirely with no contributions from you.
  • Tax-Free: Your HRA dollars are tax-free.

If you are not sure of whether your employer offers an HRA, please contact your Human Resources department.