HRA (Health Reimbursement Arrangement)

An employer-funded account that reimburses employees tax-free for qualified medical expenses and, in some cases, individual health insurance premiums.

A Health Reimbursement Arrangement (HRA) is an employer-funded benefit that reimburses employees for qualified out-of-pocket medical expenses — deductibles, copays, prescriptions, dental, and vision — without those reimbursements being treated as taxable income. Unlike an HSA or FSA, an HRA is funded entirely by the employer; employees contribute nothing. The employer sets the annual allowance and the rules for what expenses are eligible.

HRAs come in several forms. A traditional HRA is paired with an employer-sponsored group health plan and reimburses eligible medical expenses. The QSEHRA (Qualified Small Employer HRA) lets small businesses without a group plan reimburse employees for individual health insurance premiums and medical expenses up to IRS-set annual caps. The ICHRA (Individual Coverage HRA) has no contribution cap and allows businesses of any size to reimburse employees who purchase their own individual or marketplace insurance coverage.

The key difference between an HRA and an HSA is ownership. An HSA belongs to you — you keep the money regardless of employment. An HRA belongs to the employer. Unused HRA funds may or may not roll over year-to-year depending on employer design, and you generally forfeit any unused balance when you leave. Despite this limitation, HRAs provide meaningful tax-free reimbursement for out-of-pocket costs you'd otherwise pay with after-tax dollars.