Everything you need to know about health insurance
Monday, June 28th, 2010
Health Reimbursement Arrangement (HRA) - What is it?
An HRA is an IRS approved, employer-funded, tax advantaged, defined contribution employer health benefit plan that reimburses employees for out of pocket medical expenses and individual health insurance premiums. An HRA is not health insurance. The HRA allows the employer to make contributions to an employee's account and provide reimbursement for eligible expenses. The HRA is an excellent way to supplement health insurance benefits and allow employees to pay for a wide range of medical expenses not covered by insurance.
HRAs are notional arrangements; no funds are expensed until reimbursements are paid. Through HRAs, employers reimburse employees directly only after the employees incur approved medical expenses.
Unlike a Health Savings Account (HSA), there is no limit to the amount of money an employer can contribute to an employee’s HRA.
An HRA may reimburse any expense considered to be a qualified medical expense under IRS Section 213 of the Code, including premiums for personal health insurance policies. Within IRS guidelines, employers may restrict the list of reimbursable expenses in any way they choose.
HRA balances may roll forward from year to year. Employers can design the program not to allow balances to rollover from one year to the next. However, limiting the rollover feature defeats a key HRA advantage. Employers may allow employees to have access to their HRA accounts after retirement. However, employers may not pay/distribute cash or other benefit balance to any employee.
Reporting features make real-time monitoring of HRA liabilities, reimbursements and utilization easy. Employers can change plan benefits at any time or cancel the entire plan at any time. Further, HRAs allow employers to establish plan-year maximum reimbursements for any given category of expense (e.g., dental) and to establish a maximum balance that any participant class may hold at a time.
Clarifying Health is a blog about health insurance, health benefits, and everything else related to how Americans pay for medical expenses.
If you have any tips or suggestions for this blog, send an email to blog@ZaneBenefits.com and let us know. We always appreciate feedback
We also run a company called Zane Benefits where we're doing everything we can to help America out of the current healthcare mess.
If you want to learn more about how Zane Benefits helps companies with their benefits, or you're interested in working with us, visit the Zane Benefits website.
