Health Reimbursement Arrangement

What is the Health Reimbursement Arrangement?

Employers establish a healthcare plan for all their employees. Health reimbursement arrangement plan offers coverage for medical expenses. The employer gets to decide the total amount they are willing to put in the employee’s medical expenses. If the employee need money to finance their medical expenses, they can claim the health reimbursement arrangement plan.

Now, the employer has to cover the employees’ medical expenses up to the specific amount they had mentioned in the HRA agreements. It is important for the employer to keep the HRA contribution the same for each employee working in the same department.

Overview of the HRA

It is important to note that HRA isn’t an account. The employee is not allowed to withdraw money whenever they need. It is rather a plan that requires the employees to spend on the medical bills and then claims the amount they spent from the employer. If the employee uses the entire amount available in the health reimbursement plan within one year, then they will have to cover additional medical expenses themselves.

In other words, the employer is only responsible for creating the health reimbursement plan and adding a specific amount to the HRA for employee’s medical requirements. As soon as the employee’s medical expenses go beyond the amount covered in the HRA contract, they will have to pay the medical bills out of pocket.

Health reimbursement plan offers coverage for prescribed medicines, regular checkup, psychological care, transportation cost, and other such medical expenses. It even includes the payments for the meals you had while undergoing medical treatment. It is important to note that the money you get from the health reimbursement arrangement must not be used for paying the monthly or annual health insurance premiums. It is strictly used for medical expenses only.

How does the HRA Benefit Employees?

In January 2020, the government introduced quite a few crucial changes to the HRA plan. Earlier, the employer would offer a group coverage plan to their employees. However, the government makes it mandatory for each employer to offer individual coverage to each employee. Now, these changes also allow employees to use the HRAs they get from the companies for buying health insurance.

The best part is that this arrangement can finance your co-payments as well as deductibles (the amount you are supposed to pay out of pocket before you are eligible for claiming the health insurance). Even employers that have a health insurance plan for each employee can offer additional health coverage in the form of HRAs.

This plan can offer the employees up to $1,800 for the medical expenses they incur during the particular year. This plan is known as “excepted benefit HRA”. Medical expenses include the cost you incur in treating physical or mental disease. You could also use it for dental expenses. Make sure that cosmetic surgeries or general health care, such as vitamins or calcium supplements are not covered. In dental care, the HRA doesn’t cover teeth polishing.