What is a Health Reimbursement Account or HRA?

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What is a Health Reimbursement Account or HRA?

Health Reimbursement Accounts are employer-funded accounts designed to help you pay for health care.

HRA designs and their advantages will vary from employer to employer. Employers will determine how much money is in the account, which expenses are eligible, if account funds are available year to year, and whether the account is for active employment or for retirement.

Employers provide 100% of the funding. You will never use your own money to fund an HRA. The employer also determines when funds are available. Frequently, the account is fully funded on the first day of the Plan year, but some employers provide a set amount of funding each month. The employer also sets the rules for how long the funds are available. Funds may “expire” at year end or may be available year after year.

 

How an HRA WorksWhat an HRA CoversGetting an HRAUsing an HRA

Funding the Account

Your employer will provide the HRA to help you cover the costs of your health care. Some employers fund the account throughout the Plan year. Others will only provide funding at the beginning of the Plan year.

Eligible Expenses

Your employer determines what expenses are eligible to be covered through the HRA. For active employees, these often include deductibles, copayments, and coinsurance amounts. For retirees, it is common for the HRA to only cover health insurance premiums, though some retiree HRAs also cover health care expenses.

In addition, HRAs may cover services and items not covered by insurance, such as over the counter medications and supplies.

Using the Account

HRAs often include a debit card to make paying for care fast and convenient. In addition, you can submit reimbursement requests online. Keep your receipts; you will usually be asked to show that the expenses were eligible within your employer’s Plan rules.

The employer will provide a detailed explanation of the HRA, including, for example, whether you need to use all the funds during the Plan year or can continue using them in future years. Remember, though, that active employees cannot take any remaining HRA balance if they leave employment.

All eligible expenses are defined by IRS rules and your employer’s Plan. Your employer should provide you with a Summary Plan Description (SPD) which will include a list of expenses they have deemed eligible or should direct you to a website where you can view a list. Eligible expenses can include the following but be sure to check your Plan’s documentation specifics about your HRA:

  1. Insurance premiums
  2. Copays for doctor’s office and prescriptions
  3. Health expenses such as surgery and physical therapy
  4. Dental expenses such as routine preventative care, oral surgery, orthodontics
  5. Vision expenses such as routine eye examinations, eyeglasses and contact lenses
  6. Transportation used primarily for medical care

Enrolling

You can sign up during the open enrollment period or new employee sign-up period. Once enrolled, most HRAs have a website where you will be able to access your account.

Adding Money

Your employer will be the sole contributor to your HRA. You cannot use your own money to fund or add to an HRA.

There are several ways to use the funds in your HRA to pay for qualified health expenses.

Debit Card

If your employer offers a debit card, you can use it at most doctors’ offices and pharmacies to pay for qualified health expenses directly from your HRA. When you are paying for an expense, just use the card as you would a credit card or debit card.

If you inadvertently use the card for an ineligible expense, you will be asked to return the money to the HRA or to provide evidence of other eligible expenses to “offset” the ineligible amount. Don’t forget; your debit card will not work at ATMs and you cannot use it to get “cash back” at retailers.

Reimbursements

You can always pay for your eligible expenses and request reimbursement from the HRA. Just log in to the website and follow the steps to submit a reimbursement request online. If you prefer, you can also mail or fax in your reimbursement request, though more time may be required for processing. With either approach, you’ll need to provide the proof that the expenses are eligible under your employer’s Plan.