HRA
Administration

A Health Reimbursement Arrangement (HRA) is an employer-funded benefit that reimburses employees for qualified medical expenses. Unlike Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs), HRAs are funded solely by the employer and do not involve employee contributions. Employers determine the amount of money available in the HRA, and employees submit eligible expenses for reimbursement. Unused funds may or may not roll over from year to year, depending on the employer’s plan design. HRAs can be used to cover a wide range of medical expenses, including deductibles, co-payments, and certain out-of-pocket costs not covered by insurance.

The main difference between a Health Reimbursement Arrangement (HRA) and a Health Savings Account (HSA) is who owns the account and fund utilization. HRAs are employer-funded arrangements where employers reimburse employees for qualified medical expenses. HSAs, on the other hand, are individually owned accounts that employees can contribute to with pre-tax dollars, and funds can be used for eligible medical expenses. Unlike HRAs, HSAs are portable and can be taken from job to job, and funds can be invested for potential growth.

A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a type of Health Reimbursement Arrangement (HRA) designed for small businesses with fewer than 50 full-time and full-time equivalents. With a QSEHRA, employers can reimburse employees for their medical expenses, including individual health insurance premiums, up to a set annual allowance. Unlike traditional HRAs, employees can use funds from a QSEHRA to purchase health insurance on the individual market. QSEHRAs offer tax benefits for both employers and employees and can be a cost-effective way for small businesses to offer health benefits.

In addition to the HRAs listed above, there’s also the Individual Coverage HRA (ICHRA) and the Excepted Benefit HRA (EBHRA). An ICHRA allows employers to reimburse employees for substantiated individual insurance or Medicare policies with no reimbursement limit. An EBHRA can reimburse dental, vision, and STLDI premiums and out-of-pocket medical expenses, but can’t but used to pay premiums for individual health coverage, Medicare, or non-COBRA group health coverage. Employers can’t offer both an ICHRA and an EBHRA to the same employee.