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Health Reimbursement Accounts (HRAs) for Employees

Offer a valuable benefit to your employees and reinforce your commitment to their well-being by offering a health reimbursement agreement, an option that’s flexible and cost-effective for employers and employees alike.

What Is an HRA?

An HRA is a reimbursement program fully funded by employers that supplements health insurance or is offered in place of a group health plan. An HRA can be used by employees to cover qualified out-of-pocket medical expenses for themselves as well as their spouses and dependents.

an employee taking their child to the doctors

Types of Health Reimbursement Accounts

ICHRA

The individual coverage health reimbursement account allows for tax-free reimbursement of individual health insurance premiums, not group health insurance coverage. You can also decide whether the ICHRA covers other IRS-approved expenses.

EBHRA

Excepted benefit HRAs only cover copays, deductibles, and premiums for vision, dental, COBRA and short term limited duration (excepted benefit) coverage. EBHRAs are only available to employees who are offered an employer-sponsored group health plan.

QSEHRA

A qualified small employer health reimbursement account generally allows employers with less than 50 employees who don’t offer a health plan to make contributions to cover some employee healthcare expenses, such as individual health insurance premiums and coinsurance.

Spousal HRA

Employees covered under a spouse’s group health insurance plan may receive reimbursements for medical expenses with a spousal HRA. Premiums are not reimbursable.

Retiree HRA

Retiree HRAs help pay for retired employees’ insurance premiums and medical expenses.

Medicare HRA

Employers with less than 19 employees may choose to reimburse a portion of an employee’s Medicare premiums.

Integrated HRA

This HRA is often used by employers who offer group health insurance, typically as a supplement to a high-deductible health plan. That means this type of HRA is only available to employees currently covered under the company’s group health insurance policy.

Find the Right HRA for You

Get help from an insurance agent.

Stay Focused on Employee Wellbeing. Offer an HRA.

Benefits of HRAs for Employers

A Cost-Effective Health Benefit That Gives You Control

Since you administer the HRA account, you as the employer choose how much you want to contribute for each employee each year.

An Alternative to Traditional Group Health Coverage

If you can’t offer traditional group health coverage or don’t want to take on potential risks of offering traditional group health insurance, certain types of HRAs — where you offer a fixed amount per month to employees — can give you more control over the funds you contribute. Plus, HRAs aren’t subject to annual rate hikes.

Tax Advantages

Employer contributions are tax-deductible, and reimbursements are tax-free when an employee files a claim.

No Participation Concerns

There’s no negative impact to your bottom line if employees decide not to use an HRA benefit.

Choose the Features That Make Sense for Your Business

Employers have flexibility when choosing the plan features that work best for their employees and budget.

Augment Your Existing Benefits Offerings

Use an HRA to complement your existing employee benefits package, attract top talent, and retain your workforce.

Benefits of HRAs for Employees

Help With Healthcare Costs

With today’s rising healthcare costs, an employer-provided HRA can help employees pay for eligible out-of-pocket health care costs, copayments, policy deductibles, and other items that aren’t typically covered under a group health plan.

Voluntary Participation

Employee participation in an HRA is voluntary and your staff can choose whether they use the funds.

Tax-Free Reimbursements

Reimbursements from an HRA are tax-free for employees up to the maximum amount for the coverage year. This means that come tax time, the employer’s contributions don’t count toward an employee’s gross income.

More Freedom Over Healthcare Options

With an HRA, employees have greater choice over their options regarding healthcare spending and can use the employer-provided funds to cover eligible out-of-pocket medical expenses.

Is a Health Reimbursement Account Right for Your Business?

Determining whether an HRA makes sense for your business requires thorough analysis of different plan features and any potential limitations. For instance, some drawbacks of HRAs include:

  • Employees may be frustrated if they decide to leave the company, since HRA funds do not belong to the employee.
  • Depending on the type of HRA plan, there may be employer contribution limits.
  • Depending on how a business is set up, self-employed individuals aren’t eligible.

You may also want to compare HRAs to FSAs and HSAs, since each has their own rollover options, employer contributions, funding limits, funding schedules, and reimbursement options. Such variables could impact how each of these health account plans could provide value for you and your employees.

an employer determining if an hra plan is right for them

HRA Frequently Asked Questions

  • Who Owns the HRA?

    Who Owns the HRA?

    HRAs are administered and entirely funded by the employer. 

  • What Expenses Are Covered by an HRA?

    What Expenses Are Covered by an HRA?

    Only qualified medical expenses are reimbursable by an HRA. If used for a qualified medical expense, these reimbursements may be tax-free. In addition to items such as deductibles, co-pays, coinsurance, dental, vision, prescription, and other out-of-pocket medical expenses, health insurance premiums for current employees, retirees, and COBRA qualified beneficiaries may be reimbursable under an HRA (depending on the type of plan). View a full list of qualifying HRA coverage expenses here.

  • Can I Withdraw Money From My HRA Account?

    Can I Withdraw Money From My HRA Account?

    Given that an HRA coverage is only funded by the employer, employees cannot withdraw HRA funds for purposes outside of the guardrails provided by the IRS. Unused contributions in an HRA are either rolled over to the following year or retained by the employer.

  • Do I Have To Have a Certain Number of Employees To Participate in a Health Reimbursement Account?

    Do I Have To Have a Certain Number of Employees To Participate in a Health Reimbursement Account?

    While employers of any size can offer an HRA, coverage under an HRA has limits for certain types of plans. For example, a QSEHRA is allowable only for employers with less than 50 employees who don’t already offer a health plan. 

  • Are There Contribution Limits for HRAs?

    Are There Contribution Limits for HRAs?

    While many HRA plan types have no contribution limits, there is a cap for QSEHRAs in 2022: up to $5,450 for individual employees and $11,050 for families.