Health Reimbursement Arrangements (HRA)
A health reimbursement arrangement (HRA) is an employer-funded health benefit plan that reimburses employees for qualified medical expenses. HRAs can be used to reimburse employees for the cost of health insurance premiums, deductibles, copays, coinsurance, and other out-of-pocket medical expenses.
HRAs are a tax-advantaged way to pay for medical expenses. Employees do not have to pay taxes on the money that their employer contributes to their HRA, and they are not taxed on the reimbursements they receive from their HRA.
HRAs are available to employers of all sizes. However, they are most commonly offered by small businesses and mid-sized businesses. This is because HRAs can be a more affordable way for employers to provide health benefits to their employees than traditional group health insurance plans.
There are two main types of HRAs: qualified small employer HRAs (QSEHRAs) and individual coverage HRAs (ICHRAs).
- QSEHRAs are available to employers with fewer than 50 full-time equivalent employees. Employees can use QSEHRAs to reimburse themselves for qualified medical expenses, including health insurance premiums.
- ICHRAs are available to employers of all sizes. Employees can use ICHRAs to reimburse themselves for qualified medical expenses, including health insurance premiums. However, employees who are enrolled in an ICHRA must also have individual health insurance coverage.
HRAs can be a good option for employees who want to have more control over their healthcare costs. HRAs can also be a good option for employers who want to offer their employees health benefits without having to pay the high cost of traditional group health insurance plans.
If you are considering an HRA, you should speak with your employer to learn more about the plan that they offer. You should also speak with a financial advisor to get help understanding the tax implications of an HRA.