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How Do HRA Accounts Work?

An HRA is a health reimbursement account. These accounts are employer benefits offered to employees of some companies. The HRA is part of a health plan that attempts to give employees more control over their heath care costs. You should understand how these accounts work if your employer offers one.

  1. Identification

    • A health reimbursement account is a savings the employer keeps on your behalf. This account is used to help pay for medical expenses you incur while you're working and covered under your employer's health insurance plan. Your employer makes all contributions to and maintains the account.

    Significance

    • You cannot add any money to the account; your employer funds it. Unlike a health savings account, the money is held with the employer. The employer reimburses you for any expense you incur when you go to the doctor or need medical care. HRAs are often used in combination with a high-deductible health plan, or HDHP. These HDHPs have deductibles that often exceed $1,000, and are designed to offer lower premiums than co-pay plans. The reimbursement account helps offset the costs of the deductible when you need medical care.

    Benefits

    • You don't have to fund the HRA. With a health savings account, you are fully responsible for funding the account and keeping track of the money in the account. An HRA puts this responsibility onto the employer. It also relieves you from deciding how much you want to contribute to the account each year. Your employer may have more financial resources than you, so funding the account may be easier with this type of plan. On top of that, you may even benefit from the plan if you're no longer an employee. Your spouse may also be reimbursed for medical expenses if she is on your health plan, even if she doesn't work for your employer.

    Disadvantages

    • You have no control over the amount of money contributed to the plan. Your employer might contribute more than you would, but he might contribute less. You rely on your employer to sufficiently fund the account. If he doesn't, your reimbursed amount may be less than you otherwise would receive from your own health savings account.

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