What is a Health Reimbursement Arrangement?
An HRA is an employer-sponsored account to reimburse a portion of your eligible out-of-pocket medical expenses for you and probably your dependents (see more HERE), such as deductibles, co-insurance, and pharmacy expenses. It’s not an insurance plan; it's a reimbursement program funded entirely by your employer to help you make healthcare more affordable.
Who is eligible?
There are very few restrictions or criteria to meet to qualify for an HRA. Essentially, if the employer offers it, the employee is eligible.
Eligible expenses include:
Qualified expenses for a traditional HRA are determined at the discretion of the Employer. An employer can decide to allow an HRA to be used on:
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How are HRAs funded?
HRAs are pre-funded accounts which means the entire annual election is deposited into the account by the employer on the first day its opened.
Yearly Contribution Limits: There is no limitation for contribution.
Plan Year: Most often one year.
Who is eligible to Contribute? HRAs can only be sponsored by employers and eligibility rules are set by each plan. Employers who offer HRA contribute the funds to the account.
Who owns the account? An HRA is owned and set up by the employer.
What are the funds that I have access to use? An employee's yearly HRA allocation is available in full on the first day of the plan year, regardless of contributions to date.
When can I change my participation? An employee can only change their participation when there is a Qualifying Life Event (QLE).
Special Rules: Employers can choose one of three (or none) options to provide relief for HRA users who would otherwise have to forfeit leftover funds:
1. Runout Date- An extra time that an employee can submit manual claims for services render in the previous plan year to be reimbursed for that previous plan year's funds.
2. Grace Period- the last day a member can create a new qualified expense and draw from the previous year's funds. Acts like an extended end date. Since the employee can submit new manual claims and swipe their debit card from the current year while paying with the previous year's funds.
3. Rollover(Carryover)- If any funds are left in the account at the end of the plan year. The employer might move the funds into the next plan year. The rollover funds will not affect the maximum annual election for the new year. And once those funds are moved to the new plan year, only those funds can be used for the services that occur in the new plan year.
Get to know more about HRAs