What Is a Health Reimbursement Account? Helpful Facts About How It Works
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Healthcare costs can add up quickly, which is why many employers offer benefits that help workers manage out-of-pocket medical expenses. One option you may encounter is a Health Reimbursement Arrangement, commonly known as an HRA.
Although HRAs have been around for years, many employees still aren’t familiar with how they work or how they differ from other healthcare spending accounts.
What is a health reimbursement account? Read our guide that will help you make better use of employer-sponsored benefits and potentially reduce healthcare expenses throughout the year.
1. What Is a Health Reimbursement Account?
A Health Reimbursement Arrangement (HRA) is an employer-funded benefit that reimburses employees for qualified medical expenses and, in some cases, health insurance premiums.
If you’ve ever wondered what is a health reimbursement account HRA, the simplest explanation is that it allows employers to set aside money that employees can use for eligible healthcare costs. Unlike a Health Savings Account (HSA), employees do not contribute their own money to the account.
An HRA is owned and funded by the employer. The employer determines:
- Contribution amounts
- Eligible reimbursement categories
- Plan rules and limits
- Which employees can participate
It’s important to remember that funds generally remain under the employer’s control. Employees typically cannot take unused HRA funds with them after leaving the company unless the plan specifically allows it.
According to the IRS, HRAs are employer-funded arrangements that reimburse employees for qualified medical expenses up to a maximum dollar amount established by the employer.
2. How Does a Health Reimbursement Account Work?
Once an employer establishes an HRA, employees can use it to seek reimbursement for approved healthcare expenses.
Understanding what is a health reimbursement account becomes much easier when you look at the three main components of how the benefit operates.
Employer Contributions
Employers fund HRAs entirely. Employees do not make payroll contributions, and HRA funds are generally not included in taxable income when used for qualified medical expenses.
The employer determines how much money is available each year and whether unused funds can roll over into future years.
Because employers control funding levels, HRA benefits can vary significantly between organizations.
Eligible Healthcare Expenses
Most HRAs reimburse qualified medical expenses defined under IRS rules.
Depending on the plan design, eligible expenses may include:
- Doctor visits
- Prescription medications
- Hospital services
- Diagnostic testing
- Mental health services
- Dental care
- Vision care
Some HRA types may also reimburse individual health insurance premiums.
This flexibility is one reason employers continue to offer HRAs as part of their overall benefits package.
Reimbursement Process
The reimbursement process is generally straightforward. Employees typically pay for an approved healthcare expense first and then submit documentation to the employer or plan administrator.
Required documentation often includes:
- Receipts
- Invoices
- Explanation of Benefits (EOB) statements
After verification, the employee receives reimbursement up to the amount available under the HRA.
Knowing how reimbursements work is an important part of researching for what is a health care reimbursement account and how it can help offset healthcare costs.
3. What Expenses Can a Health Reimbursement Account Cover?
Eligible expenses depend on the employer’s plan design and the specific type of HRA offered.
Many HRAs cover expenses that qualify under IRS Publication 502. Examples may include:
- Primary care visits
- Specialist appointments
- Prescription drugs
- Laboratory tests
- X-rays and imaging
- Physical therapy
- Dental treatments
- Eye exams and corrective lenses
Some HRAs can also reimburse health insurance premiums, particularly Individual Coverage HRAs.
Because coverage rules vary, employees should review their plan documents carefully before assuming a particular expense qualifies.
For employees evaluating healthcare benefits, understanding what is health care reimbursement account coverage can help prevent unexpected out-of-pocket costs and maximize available reimbursements.
>>> Read more: Can You Cancel Health Insurance at Any Time?
4. Types of Health Reimbursement Arrangements (HRAs)
Not all HRAs operate the same way. Several different HRA models exist, each designed for specific employer situations.
Individual Coverage HRA (ICHRA)
An Individual Coverage HRA allows employers to reimburse employees for individual health insurance premiums and other qualified medical expenses.
Employees generally must maintain qualifying individual health insurance coverage to participate.
ICHRAs have become increasingly popular because they provide flexibility for both employers and employees.
Qualified Small Employer HRA (QSEHRA)
A Qualified Small Employer HRA is designed for smaller employers that do not offer traditional group health plans.
Through a QSEHRA, eligible employers can reimburse workers for qualified healthcare expenses and health insurance premiums up to annual IRS limits.
Small businesses often use QSEHRAs as a more affordable alternative to sponsoring a group health insurance plan.
Integrated HRA
An Integrated HRA works alongside a traditional employer-sponsored group health plan.
These arrangements typically reimburse expenses that the primary health insurance plan does not fully cover, such as deductibles, copayments, and coinsurance.
Integrated HRAs can help employees reduce out-of-pocket expenses while maintaining comprehensive health coverage.
5. Health Reimbursement Account vs HSA vs FSA
HRAs, HSAs, and FSAs all help pay healthcare expenses, but they function differently.
| Feature | HRA | HSA | FSA |
| Who funds it? | Employer | Employee and/or employer | Employee and sometimes employer |
| Employee ownership | No | Yes | Generally no |
| Requires health plan? | Depends on HRA type | Yes, HDHP required | Employer-sponsored plan |
| Tax advantages | Yes | Yes | Yes |
| Portable after leaving employer | Usually no | Yes | Usually no |
When comparing these options, many employees begin by asking what is a health reimbursement account because HRAs differ significantly from HSAs and FSAs in terms of ownership and funding.
The biggest distinction is that HRAs are funded exclusively by employers, while HSAs and FSAs often involve employee contributions.
>>> Read more: What Is A Premium In Health Insurance? 3 Key Terms Explained In 2026
Final Thoughts
Understanding what is a health reimbursement account helps employees make better use of healthcare benefits.
HRAs let employers reimburse qualified medical expenses and may cover services, prescriptions, and insurance premiums, depending on the plan.
Knowing what is a health reimbursement account HRA can help you decide how it fits into your healthcare strategy.
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