What is an HRA?


Quick Answer

A Health Reimbursement Account is a health care plan that is funded by the employer and sanctioned by the Internal Revenue Service. Through HRA, any out-of-pocket medical expenses made by an employee, his spouse or an eligible family member are reimbursed. Salary deductions cannot be used to fund the account.

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Full Answer

The employer typically sets the parameters regarding the HRA, meaning that any unused amount of money does not get transferred to the employee in case he finds new employment. Unlike the Flexible Spending Accounts, which bar any amount of money not used in a single coverage period, HRAs allow for any unused balance to transfer over to the following period. When this happens, the maximum reimbursement amount is increased for every dollar that hasn’t been spent in the previous coverage period. HRAs also allow former employees and retirees access to unused reimbursements.

An HRA does not mandate that the maximum amount of reimbursement has to be available throughout the coverage period. Additionally, it does not require the expenses to have been incurred during the coverage period to be reimbursed.

The eligible expenses that can be reimbursed by an HRA include products and services that are designed to diagnose, cure, alleviate or prevent illnesses in addition to any transportation expenses that are directly related to medical care. As of 2014, the products and services for which the cost is shared include visits to the doctor’s office, dental and vision care, and over-the-counter medicines as long as the plan covers them and the patient has a prescription.

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