Health Reimbursement Account (HRA)
What is an HRA?
An HRA is an employer funded health reimbursement account (HRA) that can be used to pay for eligible medical expenses. The employer sets aside a specific amount of pre-tax dollars to pay for predetermined healthcare expenses.
- Primary Requirements. The HRA plan must be funded solely by the employer and cannot be funded by salary reduction.
- Premium Savings. As a general rule a health plan with a higher deductible will have reduced premium costs, which creates real savings for the employer. HRA contributions may then be funded using the savings gained from the lower premium costs.
- Tax Advantages. All employer contributions to the HRA plan are tax deductible, and tax free to the employee.
How does an HRA work?
Employer establishes the HRA reimbursement rules by deciding which expenses are to be reimbursed. The HRA is typically administered by an insurance company or third party administrator to pay the designated claims. Employer makes an initial deposit then replenishes the HRA as needed.
- Reduce the deductible. The employer can decide to lower the deductible amount that the employee would need to pay - for instance, a health plan with a $5,000 deductible may have the HRA reimburse deductible expenses that exceed $3,000 - thus lowering the out of pocket expenses for the employee.
- Specific expenses. Employers may establish what expenses the HRA funds may be used for; from as comprehensive as all health related expenses to as limited as emergency room expenses only.
- Debit Cards. Your employees are provided with an HRA debit card to pay for eligible expenses. The card works at most health-related locations, including pharmacies, doctor offices, hospitals and medical supply stores.