Simplify HRA Management and Support Employees

A health reimbursement arrangement (HRA) is an employer-funded plan that reimburses employees for qualified medical expenses on a tax-free basis. Unlike other health accounts, employees do not contribute to an HRA. Employers set the rules for what expenses are covered—such as deductibles, copayments and even certain childcare or coinsurance costs—based on IRS guidelines. Any unused funds may be rolled over depending on the plan design.

HRAs are not health insurance but work alongside health insurance to support cost-sharing needs. They’re flexible tools HR leaders can use to manage benefits spend, offer personalized health benefits and align with evolving requirements from gov websites, Medicare, Medicaid and state-specific mandates like those in New York. These accounts support a modern benefits program by providing a strategic, tax-advantaged way to cover qualified medical expenses while maintaining compliance with IRS regulations.

Yes, but with restrictions. A health reimbursement arrangement (HRA) can be offered alongside a health savings account (HSA) only if the HRA is designed to preserve HSA eligibility. To do this, the HRA must be a limited-purpose or post-deductible HRA. These types reimburse only specific qualified medical expenses, such as dental or vision care or apply only after a minimum deductible is met. This allows employees to contribute to an HSA while still receiving targeted support from the employer-funded HRA.

Human resources teams offering both must align plan rules with IRS requirements to maintain tax advantages. Not all HRA configurations are HSA-compatible, so careful attention to eligibility, plan enrollment timing and expense types—like coinsurance, copayments or out-of-pocket costs—is necessary. Refer to current gov websites or IRS publications to verify rules, especially for employers operating in states like New York or those impacted by Medicaid or Medicare coordination requirements.

Employers fund the HRA and decide how it’s structured—this includes setting annual reimbursement limits, eligible expense types and any rollover rules for unused funds. Reimbursements are made only after employees incur costs and submit substantiation. Employers also decide whether to offer debit cards or mobile app options for easier claims.

From a financial perspective, HRAs offer tax advantages and help manage rising health care costs without increasing taxable wages. They also provide flexibility in benefits program design, allowing businesses to support out-of-pocket medical expenses like coinsurance and deductible costs without adding complexity to payroll systems.

Yes. A health reimbursement arrangement (HRA) is fully funded by the employer. Employees do not contribute. The employer sets the annual allowance and determines how funds can be used—whether for copayments, deductible expenses or other qualified medical costs. Reimbursements are made tax-free to employees based on submitted claims.

This funding model gives employers control over benefit spend while offering a tax-advantaged way to support employee healthcare needs. HR teams often align HRA design with existing health plan structures or specific benefits program goals, without involving payroll deductions or employee premiums.