Health Reimbursement Arrangement Accounts (HRA)

Health Reimbursement Arrangement (Accounts) have been around since 1956. However recent tax law changes have and the increasing cost of health insurance premiums have made HRA’s an affordable alternative to traditional group medical insurance. The following section is designed to provide you with the basic knowledge of how an HRA works to save your company thousands of dollars.

A HRA is a Health Reimbursement Arrangement. They combine the concepts of consumer driven health care with employer funding principals. Typically HRA’s are set up in conjunction with group health insurance. The value of a HRA is that it will allow you company to choose a health insurance plan that has higher co-pay options and/or deductibles. The HRA is then designed to off set your employees out-of-pocket expenses. The HRA plan is set with predetermined limits and is funded/paid for by the employer.

The Advantage to the EMPLOYER
The employer benefits in two ways.

  • 20-40% lower insurance premiums
  • Tax deductibility of the HRA account

Additional Employer Benefits

Not only does this combination save premium expenses, the premiums are usually tied to a health plan that will typically have lower than average premium increase at renewal. In addition to the cost savings and tax benefits the HRA typically does not need to be pre-funded. It is simply an expense account tied to the Employers general ledger. Only when expenses are paid are any deductions made from the employers account.

Employer Controls

  • Eligibility Requirements
  • Fund Limits
  • What medical expenses are covered
  • When the HRA pays (first dollar or other)
  • What happens to any unused funds
  • HRA administration is easy and flexible
  • Administration can be combined with FSA 

Employee Benefits

  • Medical reimbursements are made tax-free
  • Employer Funded
  • Designed to off set out-of-pocket expenses
  • Freedom of Choice
  • Less likelihood of premium increases
  • COBRA compliant