Healthcare costs can remain a significant expense even when you have health insurance. Deductibles, copayments, and other out-of-pocket charges can quickly strain a household budget. That’s why many employers offer additional benefits to help offset these expenses.
One of those benefits is an HRA. If you’re asking what is a health reimbursement account, this guide explains how it works, who can use it, and how it may help lower your healthcare costs.
1. What Is a Health Reimbursement Account?
A Health Reimbursement Arrangement, often called a Health Reimbursement Account (HRA), is an employer-funded benefit that reimburses employees for qualified medical expenses and, in some cases, health insurance premiums.
Unlike a traditional savings account, an HRA is owned and funded by the employer. Employees generally do not contribute money.
Instead, the employer determines the available reimbursement amount and the expenses that qualify for coverage.
When people ask what is a health reimbursement account, they are referring to a benefit that helps reduce out-of-pocket healthcare costs while providing potential tax advantages for both employers and employees.
2. How Does a Health Reimbursement Account Work?
Understanding what is a health reimbursement account becomes easier when you look at how the reimbursement process works.
Employers Fund the Account
Only employers contribute money to an HRA. Employees generally cannot add their own funds.
The amount available varies by employer and plan design. Some companies offer limited annual reimbursements, while others provide more substantial healthcare assistance.
Employees Pay Eligible Expenses
Employees typically pay qualified medical expenses and then submit a reimbursement request.
Eligible expenses may include doctor visits, prescription medications, medical equipment, and other healthcare costs covered by the plan.
Most employers require documentation such as receipts, invoices, or Explanation of Benefits (EOB) statements.
Reimbursement Is Issued
After reviewing the claim, the employer reimburses the employee for eligible expenses up to the available HRA balance.
A key advantage of an HRA is that qualified reimbursements are generally not considered taxable income for employees.
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3. Who Is Eligible for an HRA?
Eligibility depends on employer participation and plan design.
- Employees Offered an HRA by Their Employer
In most cases, only employees whose employer offers an HRA can participate. Unlike Marketplace insurance or Medicaid, individuals generally cannot open an HRA independently.
- Dependents May Also Qualify
Many HRA plans may reimburse eligible expenses for an employee’s spouse and dependents, but this depends on the plan rules.
- Eligibility Rules Vary by HRA Type
Because different HRA structures exist, eligibility requirements can differ significantly between plans.
4. What Expenses Can an HRA Cover?
After understanding what is a health reimbursement account, many people want to know which healthcare costs may qualify for reimbursement.
Common Eligible Expenses
Many HRA plans reimburse routine healthcare costs, including doctor visits, prescription medications, dental services, vision care, and certain medical equipment.
Depending on the plan design, eligible expenses may include:
- Doctor and specialist appointments
- Prescription drugs
- Dental exams, cleanings, and treatments
- Eye exams, glasses, and contact lenses
- Medical devices such as crutches, wheelchairs, or blood pressure monitors
- Mental health services and counseling
- Health insurance premiums in certain HRA arrangements
Expenses That Typically Aren’t Covered
HRA funds generally cannot be used for non-medical purchases or services that are not considered qualified healthcare expenses.
Examples of commonly excluded expenses include cosmetic procedures that are not medically necessary, gym memberships, and other costs restricted by the employer’s plan guidelines.
Because HRA rules vary by employer, employees should always review their plan documents to confirm which expenses qualify for reimbursement.
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5. Types of Health Reimbursement Accounts
Understanding what is a health reimbursement account also means recognizing that not all HRAs work the same way. Employers can choose from several types of HRA depending on their business size, benefits strategy, and employee needs.
- Individual Coverage HRA (ICHRA)
An Individual Coverage HRA (ICHRA) allows employers to reimburse employees for individual health insurance premiums and other qualified medical expenses. Employees purchase their own health insurance coverage, and the employer helps offset the cost through reimbursements.
- Qualified Small Employer HRA (QSEHRA)
QSEHRA is designed specifically for small businesses that do not offer a traditional group health plan. It enables eligible employers to reimburse employees for qualified healthcare expenses and individual insurance premiums up to annual limits set by the IRS.
- Excepted Benefit HRA (EBHRA)
An Excepted Benefit HRA can help reimburse certain limited benefits, such as dental or vision coverage, coinsurance, copayments, short-term health insurance, or other eligible healthcare costs.
For 2026, the annual limit is $2,200. It generally cannot reimburse premiums for individual coverage, traditional group health plans, or Medicare.
Understanding these options can provide additional insight into what is a health reimbursement account and how different HRA structures support employees and employers in different situations.
6. HRA vs HSA vs FSA: What’s the Difference?
Although HRAs, HSAs, and FSAs all help individuals manage healthcare expenses, they work differently in terms of ownership, funding, and portability.
| Feature | HRA | HSA | FSA |
|---|---|---|---|
| Who funds it? | Employer only | Employee and/or employer | Primarily employee |
| Account owner | Employer | Employee | Employee |
| Requires a high-deductible health plan? | No | Yes | No |
| Can funds be taken when changing jobs? | Usually no | Yes | Usually no |
| Tax advantages | Tax-free reimbursements | Tax-deductible contributions and tax-free withdrawals for qualified expenses | Pre-tax contributions and tax-free qualified withdrawals |
| Contribution limits | Determined by employer or plan type | IRS annual limits | IRS annual limits |
For employees comparing benefit options, understanding the differences between these accounts is just as important as understanding what is a health reimbursement account.
7. FAQs About Health Reimbursement Accounts
Is a health reimbursement account taxable?
In most cases, qualified reimbursements received through an HRA are not considered taxable income for employees. Employers may also receive tax advantages for offering these benefits. However, tax treatment can vary depending on the specific arrangement and applicable regulations.
Can I keep my HRA if I change jobs?
Usually, no. Since HRAs are employer-owned benefits, employees typically cannot keep the account after leaving the company unless the plan includes special continuation provisions.
Can you take money out of a health reimbursement account?
No. Unlike a personal savings account, an HRA does not allow employees to withdraw cash freely. Funds are typically available only through reimbursement for eligible healthcare expenses approved under the plan.
What is a disadvantage of a health reimbursement account?
One potential disadvantage is that employees do not own the account. In most cases, unused funds cannot be taken to a new employer, and reimbursement rules are determined by the company offering the benefit. Additionally, employees generally cannot contribute their own money to increase available funds.
Final Thoughts: Understanding HRAs Simply
If you’ve been asking what is a health reimbursement account, the simplest answer is that it’s an employer-funded benefit designed to help employees pay for qualified healthcare expenses.
Unlike HSAs and FSAs, HRAs are funded entirely by employers and typically reimburse employees after eligible expenses are incurred.
Depending on the plan type, HRAs can help cover medical costs, insurance premiums, or other approved healthcare expenses while offering valuable tax advantages.
