Health Reimbursement Account
Health Reimbursement Accounts, or Health Reimbursement Arrangements, (HRAs) are IRS-sanctioned arrangements that allow an employer, as agreed to in the HRA plan document, to reimburse for medical expenses paid by participating employees. HRAs reimburse only those items (copays, coinsurance, deductibles and services) agreed to by the employer which are not covered by the company's selected standard insurance plan (any health insurance plan, not only high-deductible plans). These arrangements are described in IRS Section 105.
Qualified claims must be described in the HRA plan document at inception, i.e., before reimbursing employees for those medical expenses. Arrangements (medical services, dental services, co-pays, coinsurance, deductibles, participation) may vary from plan to plan, and an employer may have multiple plans in place, allowing much flexibility.
The employer is not required to prepay into a fund for reimbursements, instead, the employer reimburses employee claims as they occur. Reimbursements of qualified claims are tax-deductible for the employer.
Reimbursements claimed by the employee are tax free (not included in W2 earnings), provided they are tied to qualified health care expenses (as defined in Section 105). HRAs are initiated by the employer and serviced by a third-party administrator or plan service provider; the employee does not pay for the right to participate. The employer may provide in the HRA plan document that credit balances in an employee's HRA account can be rolled over from year to year like a savings account. The employer decides if the funds are rolled from year to year and how much rolls over (which can be either a flat amount or a percentage).
A frequent complaint regarding HRA arrangements is that they are extremely opaque in regards to their requirements. Rules pertaining to their reimbursements are perceived by member participants to be somewhat contradictory and/or even incoherent- leading some to lose contributions which are intended for healthcare but are learned (after the procedure or laboratory test) to be disallowed.
Complaints pertaining to HRA management are dealt with thru ERISA channels.
See also
- Consumer driven health care
- Consumer driven health plan
- Flexible spending account (FSA)
- FSA debit card - Debit cards issued with HRAs fall under the same restrictions as FSAs.
- Health Savings Account (HSA)
- Medical savings account (MSA)