insurance

Health Reimbursement Arrangement

An employer-funded account that reimburses employees for qualified medical expenses and sometimes insurance premiums on a tax-free basis. Unlike HSAs, HRAs are owned and controlled by the employer, who determines contribution amounts and eligible expenses.

Example

“Lisa's employer contributes $1,500 annually to her HRA, which she uses to get reimbursed for her family's prescription costs and dental cleanings throughout the year.”

Memory Tip

HRA = 'Help Reimburse Anything' (medical) - the employer helps by reimbursing your healthcare costs.

Why It Matters

HRAs provide tax-free money for healthcare expenses without requiring employee contributions, making medical care more affordable. They're particularly valuable for employees with high-deductible plans or those facing significant ongoing medical expenses.

Common Misconception

Many employees think they own their HRA funds or can take them when they leave the company. Unlike HSAs, HRA funds belong to the employer and typically can't be transferred or retained after employment ends.

In Practice

Jennifer's company provides a $2,000 annual HRA alongside a high-deductible health plan with a $3,000 deductible. When her son breaks his arm, the emergency room and orthopedic bills total $2,800. Her HRA reimburses $2,000 of these expenses tax-free, leaving her with only $800 in out-of-pocket costs instead of the full $2,800, effectively reducing her deductible burden by two-thirds.

Etymology

HRAs were formally recognized by the IRS in 2002 as a way for employers to 'arrange' or 'arrange for' reimbursement of employee medical expenses while maintaining tax advantages.

Common Misspellings

Health Reimbursment ArrangementHealth Reimbursement ArangementHRA accountHealth Reimbursement Agreement

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Other insurance terms you should know

deductibleThe amount you pay out-of-pocket before your insurance begin…insurance premiumThe amount paid periodically to an insurance company in exch…deductibleThe amount a policyholder must pay out of pocket before insu…copayA fixed amount paid by an insured person at the time of a me…coinsuranceA cost-sharing arrangement where the insured pays a percenta…out-of-pocket maximumThe most an insured person will pay for covered healthcare s…