The Congressional Research Service released an overview and history of Health Reimbursement Arrangements (HRAs).
An HRA is a tax-advantaged account for a present or former employee that is used to reimburse participants for qualified medical expenses. Qualified medical expenses include
- amounts that are paid for the diagnosis, cure, mitigation, treatment or prevention of disease and treatments affecting any part of the body
- health insurance premiums
- qualified long term care services
- menstrual care products.
HRAs allow individuals to use employer-provided funds to cover the cost of health insurance and unreimbursed medical expenses up to a specified limit. The employer contributes money to an employee’s HRA and that money is used for reimbursements. Employer contributions to an HRA are not included in an employee’s income and distributions for qualified medical expenses are tax-free.
There are 5 types of HRAs:
- Group health plan HRAs which are available to employees enrolled in a group health plan
- Small employer HRAs (QSEHRAs) which are available to employees of a small employer enrolled in minimum essential coverage
- Individual coverage HRAs (ICHRAs) available to employees enrolled in individual health coverage
- Excepted benefit HRAs which have small contribution limits and restrictions on distributions
- Retiree-only HRAs which are available only to retirees of an employer.
The CRS publication describes each type of HRA and provides useful information for employers who have or are considering an HRA. The publication may be accessed by clicking here.