Health Reimbursement Arrangement (HRA)
A Health Reimbursement Arrangement (HRA) is a type of employer-funded health benefit plan that reimburses employees for incurred medical expenses and, in some cases, insurance premiums. HRAs are designed to complement health insurance plans and provide employees with tax-free reimbursements for qualified medical costs.
Employers set up HRAs and specify the terms, including the amount available for reimbursement and what expenses are eligible. Employees can use these funds for a variety of healthcare-related expenses such as deductibles, copayments, and other out-of-pocket costs not covered by insurance.
For example, if an employee has a $2,000 deductible on their health insurance plan, the employer can provide a $1,000 HRA that the employee can use to cover part of that deductible. Reimbursements from an HRA are not considered taxable income for the employee, making it a tax-efficient way to manage healthcare costs.
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