What is an HRA?
A health reimbursement arrangement (HRA) is an employer-sponsored and employer-funded account designed to help cover certain out-of-pocket medical expenses that are not covered by your health plan. Each employer determines what type of HRA they will sponsor – some are for standard medical eligible expenses, while others might be for dental/vision expenses only, health plan premiums or wellness incentives.
Why an HRA?
Since employer contributions to an HRA do not count as income, you do not pay taxes on either the contributions or the reimbursements your employer makes for qualifying claims on your behalf. This benefit creates a significant tax savings for participants on items and services paid for by your HRA compared to paying for medical expenses with post-tax dollars.
Participation in an HRA is a great way to maximize your health care spending. HRAs often are paired with high deductible health plans (HDHPs). When they are, you are able to enjoy a lower monthly cost for your health plan AND have HRA funds available to cover your out-of-pocket costs.
Also, HRAs are highly configurable and some employers may allow you to carryover funds beyond your plan year. This feature allows you to create a safety net for a large-scale expense or medical need.