Health Reimbursement Accounts (HRAs) supplement your health insurance policy. Employer-funded, they reimburse you for a variety of qualified medical expenses. Understand HRAs so you can maximize your coverage.
What are HRAs?
Also known as Section 105 Medical Reimbursement Plans or Health Reimbursement Arrangements, HRAs work like employer-owned reimbursement accounts. You pay for eligible medical care and then submit claims for reimbursement under the plan.
An HRA is funded by your employer, not by your own pre-tax payroll deductions. Because contributions are employer-funded and excluded from your taxable income, HRA reimbursements are generally tax-free.
Your employer sets the HRA dollar amount. Unlike a Flexible Spending Account (FSA) or Health Savings Accounts (HSA), an HRA has no statutory contribution limit, so your employer decides how much to deposit each year.
If you don't use all the funds in your HRA, money may roll into the next year if your employer's plan allows rollover. Some plans permit distributions after retirement; check your plan documents or ask your benefits administrator. For related reimbursement products, see Loss Reimbursement Insurance.
What Expenses Qualify?
A variety of health care expenses may be reimbursed with an HRA as long as the expense is not reimbursed from another source and is not itemized on your tax return. Typically, eligible expenses include:
- Surgery
- Diagnostic tests
- Co-pays and deductibles
- Out-of-pocket expenses
- Prescriptions
- First aid supplies
- Medical equipment
- Dental expenses
- Vision expenses
Who's Covered by an HRA?
Your personal medical expenses are covered by an HRA. It may also pay for unreimbursed medical expenses incurred by your spouse, a qualifying child under age 26, or a dependent parent.
Check your specific HRA plan documents or ask your benefits administrator for exact details on who is eligible for reimbursements under your employer's plan.
Why Use an HRA?
If your employer offers an HRA, consider taking advantage of it for several reasons.
- Supplement a high-deductible health insurance policy.
Many insurance plans include high deductibles or limited dental and vision coverage; an HRA can help cover those gaps.
- Improve your health.
Use HRA funds for necessary care—like diagnostic testing, follow-up visits, or prescribed medications—so you can get timely treatment.
- Save money.
Because employer contributions and reimbursements are generally tax-advantaged, an HRA can reduce your out-of-pocket cost for eligible care.
Health reimbursement accounts can be a valuable complement to your health insurance and help stretch your health care budget; ask your employer about opening an HRA today or talk to an agent.
Frequently Asked Questions
How is an HRA funded?
An HRA is funded by your employer; they set the contribution amount and decide whether funds may roll over from year to year.
Can I use HRA funds for family members?
Many HRAs cover unreimbursed medical expenses for a spouse, qualifying children under age 26, or dependent parents, but plan rules vary.
Are HRA reimbursements taxable?
No, HRA reimbursements are generally tax-free because contributions are employer-funded and excluded from your taxable income.
What happens to unused HRA funds if I leave my job?
That depends on your employer's plan rules; some plans allow rollover or distributions, while others forfeit remaining balances when employment ends.