What Is an HRA?
An HRA, or "health reimbursement arrangement," is sometimes also called a "health reimbursement account," and refers to an account set up for an employee by their employer that contains funds to be spent on health care needs. Whether or not an HRA is part of the employee's health care benefits package and exactly what types of medical services are covered will be determined by that employer. If an HRA is offered, the employee will not have to pay into the account. An HRA can be a valuable health care benefit, if you understand what it is for and how to use it. Learn more about an HRA account and put its benefits to work for you.
What Is an HRA?
An HRA is an account that your employer will put funds into for use on an annual basis to cover basic medical costs, all of which will be outlined in your employee health care policy. An employer who is trying to keep the costs of maintaining health care benefits for the workforce down will often opt to fund HRA accounts for employees, not as a substitute for traditional health insurance, but as a type of pre-supplemental policy that allows employees to spend on qualified care until the fund is exhausted, after which time traditional health care coverage benefits will then kick in. The presence of an HRA also often allows employers to offer higher deductible health care plans to employees, counting on the HRA to take care of more of the employee's medical needs and allowing the employer to spend less on health care than they would having to be maintain low deductible traditional health care coverage for each employee.
How Does an HRA Work?
HRA benefits may differ greatly from employer to employer. What stays the same is that each employer will set the contribution amount into the HRA fund per employee, and these levels may differ based on rank or status, years of employment, and other elements. Some employers will physically deposit money into an HRA account, while others will simply provide direct payment for services up to a certain dollar amount. Some employers will allow unused HRA funds to transfer over to the new year and combine with that new year's funds, and other employers will not allow this. Some employers will allow employees who are terminated or who choose to leave to take the funds with them when they depart, and other employers will not. The best way to find out the exact mechanics of how your employer's HRA fund works is to contact the health benefits or human resources department and ask your questions.
The Difference Between an HSA and an HRA
While the terms sound very nearly the same, there is a difference between an HSA, or "health savings account," and an HRA. The HSA is designed to be a tax-exempt account that is funded both by either or both the employer and the employee, and can be taken with the employee once they are no longer with the company.
