Introduction to a Health Reimbursement Arrangement

Do you like free money? No, that’s not a trick question.

If you could pay for out-of-pocket health care expenses without having to use your own income, you would, wouldn’t you? Well, that’s the beauty of a Health Reimbursement Arrangement or HRA.

HRAs, are tax-advantaged benefit accounts that are part of your employer’s benefit package. Unlike a Flexible Spending Account or a Health Savings Account, HRAs are entirely funded by your employer. You do not contribute any money to your HRA.

HRAs are paired with a specific health insurance plan option, and help offset certain health care expenses that may not be covered by the plan – such as deductibles, copays, coinsurance, and prescriptions.

The amounts credited to your HRA account are not subject to taxation, so they do not count against your taxable income. Essentially, an HRA is free money to pay for eligible health care expenses for you, as well as your spouse and your dependents if covered by your group health plan.

They work like this: Your employer will credit a specified amount into your HRA for the plan year. Your employer also determines when and how the funds become available to you – which could be all at once on the first day of the plan year, released throughout the year, or possibly after a deductible or other criteria is met.

Your HRA funds can be used for qualified medical expenses as defined by the IRS and your employer. Typically, expenses like doctor’s office visits, labs, and prescriptions are eligible.

In some cases, unused funds may roll over into the next year, but not always. Be sure to check with your employer.

Because your HRA is closely tied to your health insurance plan, sometimes HRAs are set up to automatically pay your provider when a health insurance claim is processed.

If a debit card is provided by your employer, you can use it to gain instant access to your HRA funds. Or, you can submit a claim to be reimbursed for eligible expenses paid for out of pocket.

But, no matter how you pay, be sure to keep your receipts, as they will often be required by your administrator to verify purchase eligibility.

Finally, remember: All HRA plans are different. So, before you enroll, make sure to check with your employer to determine:

• How much your employer contributes

• When you gain access to your HRA

• Which expenses are eligible

• How you pay or get reimbursed from your HRA

• Whether unused funds roll over

Whether you are single, married, have dependents, or are nearing retirement, HRAs are a flexible benefit that can help you save on necessary health care costs. After all, who doesn’t like free money?