A health reimbursement arrangement — sometimes called a health reimbursement account — is a 100% employer-funded plan. Employers of any size can offer an HRA.
An HRA provides a ready pool of money for qualified medical expenses. Some HRAs are coupled with health savings accounts (HSA), giving employees more leverage in managing their health care costs.
Health reimbursement arrangements allow employers to set aside a lump sum for each employee. There is no limit on the amount of money that employers can contribute.
The employee receives the money tax-free as reimbursement for health care expenses. Employers also get a tax advantage as the money is not considered taxable wages under IRS rules.1 HRA dollars can pay for family members’ health needs, too, if the employer allows.
Money in an HRA may roll over from year to year, depending on the employer’s preference. Different types of HRAs can cover insurance premiums, copays, deductibles, and other qualified medical expenses.
There are several types of HRAs that employers can offer, depending on the size of the company and its other insurance provisions. Types of HRAs include:
Group health HRAs supplement employer-provided group health insurance, primarily high deductible health plans (HDHP). The HRA reimburses qualified medical expenses recognized under IRS code. Employers may also offer the group health HRA to staff covered under a spouse’s health plan.
Employers can also create an HRA that helps pay for eligible medical expenses during retirement. The employer can make annual or monthly contributions. Depending on HRA parameters, retirees can use the money for individual health coverage, Medicare premiums, and/or qualified medical expenses. A retirement HRA is a perpetual account that allows the balance to carry from year to year.
An HRA incentive is another type of employer-funded program. This program allows employees to earn HRA dollars by completing wellness activities. Activities can include annual physicals, screening tests, weight loss, smoking cessation, or other company-specific health tasks.
The U.S. Treasury, Department of Labor, and Health and Human Services estimate that more than 800,000 employers will offer HRAs by 2029.2 Your company and employees might be able to benefit from one of the options outlined above.
Navigating the HRA ecosystem is complex. It’s important to consult with insurance experts before making any decisions. Look for an employee-friendly solution that features online claim submission and other automated features that make good health easier.
Learn more about how HRAs can help employers offset out-of-pocket health costs for their employees.
References
1 U.S. Department of the Treasury. Internal Revenue Service. Publication 969. Cat. No. 24216S. Health Savings Accounts and Other Tax-Favored Health Plans. https://www.irs.gov/pub/irs-pdf/p969.pdf
2 U.S Department of the Treasury. News. Press Releases. U.S. Departments of Treasury, Health and Human Services and Labor Expand Access to Quality, Affordable Health Coverage Through Health Reimbursement Arrangements. https://home.treasury.gov/news/press-releases/sm708
All references to “Highmark” in this communication are references to Highmark Inc., an independent licensee of the Blue Cross Blue Shield Association, and/or to one or more of its affiliated Blue companies.
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