Health Reimbursement Arrangement (HRA)
A Health Reimbursement Arrangement (HRA) is a plan that lets employees control how their health care dollars are spent. The plan combines a health insurance plan with an HRA funded by the employer.
How the HRA works
Consider the example using one of our qualified plans with a $1,000 deductible, $1,000 coinsurance:
- The employer puts $500 in an HRA. This money can be used to pay for covered health services such as, hospital care, office visits, prescription drugs and other eligible services under the health insurance program. The employee pays no taxes on the money that goes into the HRA. In addition, the employee doesn’t pay for any covered health care expenses until the employee uses all of the money in the HRA.
- After the $500 in the employer-funded HRA is spent, the employee pays for the next $500 in medical expenses and prescription drugs until the remainder of the health plan’s $1,000 deductible is met.
- Once the $1,000 deductible is met, the employee pays a coinsurance percentage for covered medical and prescription drug expenses up to the health insurance program’s $1,000 coinsurance maximum. When that $1,000 amount is met, the plan pays 100 percent of covered services for the remainder of the benefit period.
An HRA offers:
- Tax savings
- Employees gain a greater appreciation for the value of health care benefits
- Employees have more control over their personal health care choices
- Frequently Asked Questions: Review the answers to some common questions about health reimbursement arrangements.