Health Reimbursement Arrangement (HRA)

A Health Reimbursement Arrangement (HRA) is a type of employer-funded health benefit plan that reimburses employees for out-of-pocket medical expenses and allows them to pay for qualified medical expenses with pre-tax dollars.

Example #1

For example, if an employee visits the dentist and incurs a bill of $200, they can submit a claim through their HRA to their employer for reimbursement.

Example #2

Another example is when an employee needs to buy prescription medications; they can use funds from their HRA to cover these costs.

Misuse

Misusing an HRA can occur when an employer fails to provide employees with accurate information about how the HRA works or restricts access to funds employees are entitled to. For instance, if an employer misleads employees about eligible expenses covered by the HRA, it can result in employees unknowingly paying for medical expenses that could have been reimbursed.

Benefits

One of the main benefits of an HRA is that it helps employees manage their healthcare costs by providing a tax-advantaged way to pay for medical expenses. For example, employees with chronic conditions can use funds from their HRA to cover ongoing treatment costs without incurring additional financial burden.

Conclusion

Health Reimbursement Arrangements (HRAs) can be valuable tools for employees to offset healthcare costs and access necessary medical services. It is crucial for both employers and employees to understand how HRAs work to ensure they are utilized effectively and ethically.