Glossary Term

Health Reimbursement Arrangement

A health reimbursement arrangement (HRAs) is a commitment from an employer to reimburse (up to a predetermined limit) the health care expenses of employees and their dependents. The most common type of HRA is a group plan HRA. An employer can provide this HRA in conjunction with the offer of a group health plan, and employees wishing to use the HRA must be enrolled in this group plan. The funds allocated by the employer to reimburse qualified medical expenses are held by the employer, but distributions do not count toward employees’ income.

Group health plan HRAs can be used only to pay for qualified medical expenses under Section 213(d) of the Internal Revenue Code that are not reimbursed by the plan. Qualified medical expenses include costs such as copayments, coinsurance, and deductibles. Similar out-of-pocket charges for dental and vision care, while excepted benefits, are also qualified medical expenses for a HRA. Employers can, however, further restrict the use of the HRA. Unused HRA balances may be carried forward, but interest is not earned since the HRA is not prefunded by the employer.

The employers set the term of the reimbursement and determine the total reimbursement amount as well as the items that employees can use HRAs to purchase. The self-employed are not eligible for HRAs. In 2019, the federal Departments of Health and Human Services, Labor, and the Treasury issued a rule creating an HRA eligible for reimbursing employee premiums for ACA-compliant individual market coverage. These new HRAs were called ICHRAs, the individual coverage health reimbursement arrangement.


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