Health Reimbursement Arrangements (HRAs)
A Health Reimbursement Arrangement (HRA) is an employer-sponsored tax-advantaged plan that helps employees pay for qualified medical and dental expenses. Employers fund HRAs, setting a yearly contribution limit. Employees can then use these funds to get reimbursed for eligible out-of-pocket medical costs, up to the amount contributed.
What can HRAs be used for?
The specific eligible expenses for HRAs can vary depending on the plan design. However, some common qualified medical expenses typically covered by HRAs include:
- Doctor visits
- Prescriptions drugs
- Dental and vision care
- Deductibles, copays, and coinsurance
- Preventive care services
Types of HRAs:
There are three main types of HRAs:
A. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA): This HRA is designed for small businesses with fewer than 50 full-time equivalent employees. QSEHRAs allow employers to offer financial assistance to employees who purchase individual health insurance plans on the Marketplace.
B. Health Savings Account (HSA) Compatible HRAs: These HRAs work in conjunction with HSA-qualified high-deductible health plans (HDHPs). Employees can use the HRA to cover qualified medical expenses before reaching the HDHP deductible, while saving money in the HSA for future medical needs.
C. Individual Coverage HRAs (ICHRAs): This is a relatively new type of HRA. ICHRAs allow employers to offer reimbursements for individual health insurance premiums and qualified medical expenses, even if employees don't enroll in the employer's group health plan (if offered).
Who is eligible for an HRA?
Eligibility for HRAs depends on the specific plan design. Generally, most full-time employees of companies that offer HRAs are eligible. However, there may be exclusions based on factors like employment status or coverage under other health plans.
What are qualified medical expenses for HRAs?
The IRS defines qualified medical expenses that can be reimbursed through HRAs. These include expenses for doctor visits, prescriptions, dental and vision care, and certain over-the-counter medications.
Can I use HRAs to pay for health insurance premiums?
This depends on the HRA type. Traditional HRAs typically don't cover health insurance premiums. However, QSEHRAs and ICHRAs can be used to reimburse individual health insurance premiums, along with qualified medical expenses.
What happens to unused funds in my HRA?
Depending on the HRA type, unused funds in some HRAs may be carried over to the next year. However, some HRAs have a "use it or lose it" policy, where unused funds are forfeited at the end of the plan year.
How do I find out more about my HRA?
The best way to understand the specifics of your HRA is to consult your employer's HR department or plan administrator. They can provide details on contribution limits, eligible expenses, and the claims reimbursement process.