Consumer-Directed Health Plans 101:
3. Health Reimbursement Arrangements (HRAs)
An HRA is an account-like arrangement set up by your employer to reimburse your qualifying medical expenses. HRA funds can be used to pay for your deductible, copayments, and coinsurance, and sometimes even expenses like over-the-counter medications, dental, or vision care. Your employer decides how much they’ll contribute, what expenses are covered, and whether unused funds can roll over from year to year. HRAs give employers a lot of flexibility, so plan specifics can vary greatly from one HRA to another.
You don’t make contributions to your HRA, and you’re not taxed on the money you receive. Many employers allow unused HRA balances to carry over from year to year as long as you’re still covered under the health plan. But if you leave your job, chances are your HRA will stay behind with your employer.
Unlike the HSA, HRAs are really bookkeeping arrangements between you and your employer. Your employer makes available a certain amount for each employee’s HRA, but there aren’t separate employee accounts. Depending on the plan design, some HRAs come with debit cards you can use to access your funds. If not, you’ll provide documentation of your incurred expenses and be reimbursed by check or direct deposit.
- HRAs are funded and owned by your employer.
- Your employer sets the rules about how you can use your HRA funds.
- Some HRAs allow you to carry your unused balance over from year to year, as long as you're still covered under the plan.
- HRAs often stay with your employer. If you leave your job, check with your plan to see if you can use any money left in the account.
- There are many ways for employers to structure HRAs, so plan designs vary widely. If you have an HRA, be sure you understand your employer's plan benefits and limitations.
Next, we’ll cover FSAs.
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