A Health Reimbursement Account (HRA), also known as a Health Reimbursement Arrangement, can be a win-win, providing a tax deduction for employers while lowering healthcare costs and offering better coverage for employees.
What is a Health Reimbursement Account?
A Health Reimbursement Account (HRA) Is an employer-sponsored plan that employers establish to help off-set employee medical expenses. HRAs are often paired with high deductible health insurance. All contributions to the HRA are made by the employer.
With an HRA, participants are reimbursed for eligible out-of-pocket expenses, which are determined by the employer and may include co-pays, coinsurance and deductibles, some insurance premiums, dental services, and other expenses as defined in IRS Publication 502. Reimbursements are generally tax-free when used for qualified medical expenses.
Employers contribute a predetermined dollar amount for each employee into the account and the employee has a set amount of time in which the funds may be claimed. The funds are not available until a qualified expense is incurred.
Claim submission requires a claim form as well as supporting documentation, typically the Explanation of Benefit statement that is generated by the health insurance provider.