Health Reimbursement Arrangement (HRA)

The Health Reimbursement Arrangement (or HRA) is an allocation by the employer for each eligible employee. HRA funds are not deposited to a separate trust account in advance, but payments are made when claims are processed. The employer sets a maximum allocation each year, for each employee.

Employees use the money in their HRA to pay for eligible health care services, including doctor visits and prescription drugs.

Any money that remains at the end of the contract year may, if the employer chooses, roll over to the following year – thus increasing the overall balance in the fund. If the employee leaves the company, the money stays with the employer.

With an HRA, the employer can set limits on how an employee's funds are used. They can be as unconditional as allowing access to all services outlined by the IRS (Section 213(d) of tax code) or as restrictive as limiting use of these funds to those services outlined in the group health coverage.