What is an HRA?
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​​A health reimbursement arrangement (HRA) is a health plan that’s funded by your employer. It’s used to pay for qualified medical expenses not covered by your primary health insurance.

You can use an HRA in addition to an FSA and HSA. But it doesn’t quite work the same way as those accounts. Here’s how an HRA is different from other types of health savings plans. 
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Account Comparison	HRA	HSA	FSA
Only your employer can contribute money to the account.	Yes	No	No
Pre-tax funds are deducted from your paycheck to fund the account.	No	Yes	Yes
You can contribute money to the account every year you qualify.	No	Yes	Yes
You are required to have a high-deductible health plan.	No	Yes	No
The funds in your account can be invested.	No	Yes	No

Employers set up and fund HRAs. If your employer offers an HRA, they don’t have to offer you a traditional group healthcare plan. You can choose your own healthcare plan and use the funds in your HRA to pay for items not covered by insurance. 
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Employers determine how much they contribute for the year, within the limits set by the IRS. Unlike an FSA or HSA, employees don’t contribute money to an HRA. Employers reimburse employees for qualified healthcare costs that were paid out of pocket. 

Let’s say you have an HRA and you need to pay for an inhaler, but your insurance plan doesn’t cover it. If your employer includes inhalers as a qualified expense, the HRA will reimburse you. You can typically file a claim for reimbursement anytime during the benefit year.

Do employees pay taxes on funds in an HRA?
No, employees don’t have to worry about paying taxes on HRA reimbursement funds used for qualified medical expenses. But, similar to an HSA or FSA, you have to make sure your HRA dollars are used to pay qualified medical expenses specifically to receive the tax-free benefits.

What can you use an HRA for?
You can use an HRA for IRS-defined, eligible medical expenses. Medical expenses are costs to diagnose, cure, treat, or prevent disease. Employers decide which specific medical expenses to cover when setting up a plan. This means that not all HRAs cover the same medical expenses.

Expenses that are typically reimbursed by an HRA include:

• Insurance deductibles
• Coinsurance
• Copayments
• Prescription medications
• Immunizations
• Dental and vision expenses

Advantages of an HRA:
Lower out-of-pocket healthcare costs.

• Unused benefits that are carried over to the next year, if the employer permits
• A fully employer-funded plan
• Tax-free reimbursements

There are also some disadvantages to HRAs. Some of those disadvantages are:

• An employer can require employees to meet a minimum deductible amount before receiving reimbursement for expenses. That means you’ll have to spend money on qualified medical expenses before you can use HRA funds.   
  
• You cannot use HRA funds after termination if the employer does not allow it.
  
• An employee cannot contribute to an HRA. The employer has control over how much money is available to employees every year.  
• Your employer can’t directly give you unused money from an HRA.
• Employers decide which medical expenses are qualified, so not all of your yearly medical expenses may be reimbursable.