What Is a Health Reimbursement Account (HRA)?
A Health Reimbursement Account (HRA), sometimes referred to as a Health Reimbursement Arrangement, is a savings account. Unlike a Health Savings Account (HSA), it is funded by an employer and not an individual enrolled within a health plan. The employee may not agree to a voluntary pay reduction in order to fund a HRA.
There is no contribution limit on the employer with respect to a HRA. HRA funds that remain at the end of a year may be rolled over into the following year. However, the IRS states "the maximum reimbursement amount credited under the HRA in the future may be increased or decreased by amounts not previously used."
There are limitations on HRAs. The self-employed may not create a HRA for him or herself. Likewise, highly compensated individuals may face limitations with respect to their HRAs. While HRAs do not have to used in conjunction with a high deductible health plan (HDHP), starting in 2014 HRAs face additional restrictions when they are not used with a HDHP.
Not every medical expense qualifies for payment by HRA funds. For example, if you buy over-the-counter drugs like ibuprofen you cannot pay for them with HRA funds unless you have a doctor’s prescription for the over-the-counter drugs. Below is a list of some of the medical expenses that can be paid for using HRA funds:
- Doctor visits
- Prescription drugs
- Copayment or coinsurance expenses for medical procedures
- Health insurance deductible
- Dental visit or vision visits
- Durable medical equipment
- Hearing aids
Unlike a HSA, a HRA can be used to reimburse a health insurance premium.
Your health plan will determine the method by which you can access HRA funds. For example, the health plan may provide a debit card attached to the HRA account.