What are the advantages of individual health insurance?

Individual health insurance gives employees more control over their health coverage. They can choose a plan based on their preferred doctors, provider networks, medical needs, and budget. Additionally, unlike group coverage, individual policies are portable, so employees can keep their coverage if they leave their employer’s company.

Is individual health insurance cheaper than group health insurance?

Individual health insurance can be less expensive than small group coverage, although costs vary by location, plan, age, and household. Employers can offer their staff a stand-alone HRA to provide a predictable contribution toward employees’ individual premiums and other eligible medical expenses.

Can an employer reimburse employees for individual health insurance?

Yes. Employers can use a formal HRA, such as a CHOICE Arrangement or a QSEHRA, to reimburse employees tax-free for eligible individual health insurance premiums. Eligibility, employer contribution limits, and reimbursable medical expenses depend on the HRA type and plan design.

What is the difference between individual and group health insurance?

With group health insurance, the employer selects the plan and employees generally enroll in the coverage offered. Coverage specifics depend on the plan, meaning employees have less control over their care options. With individual health insurance, each employee chooses and enrolls in their own policy on public exchanges or through private insurance companies. An HRA allows an employer to contribute toward the cost of employees’ individual coverage instead of offering a traditional group plan.

Can employees get premium tax credits with individual health insurance?

Under the Patient Protection and Affordable Care Act (ACA), employees may qualify for premium tax credits when purchasing ACA Marketplace coverage, depending on their income and other eligibility factors. However, an HRA can affect eligibility for those credits. Employees offered a CHOICE Arrangement must choose between the HRA and their tax credits. In most cases, employees should waive their tax credits and opt into their benefit if it’s affordable. With a QSEHRA, employees must reduce their HRA contribution by their subsidy amount if their benefit is unaffordable for one or more months. Those with an affordable QSEHRA can’t collect their tax credit for that month.

HRA FAQs for employees

By Holly Bengfort on September 28, 2026 at 3:15 PM

Are you trying to understand health reimbursement arrangements (HRAs) and how they benefit you as an employee? An HRA is a flexible benefit that can help you manage rising healthcare costs. But like any unfamiliar benefit, HRAs can seem complex at first.

In this article, we'll answer 12 common questions you may have about your new employee benefit.

In this blog post, you'll learn:

What's considered a qualified medical expense for your HRA.
What type of insurance coverage you need to participate in this health benefit.
The advantages of HRAs for employees.

1. What is a health reimbursement arrangement?

Sometimes mistakenly called a health reimbursement account, a health reimbursement arrangement (HRA) is an employer-funded health benefit. With an HRA, your employer offers you tax-free reimbursements for qualified medical expenses. If your employer offers a stand-alone HRA, this includes your individual health insurance premiums.

Your employer may offer you one of the following stand-alone HRAs as an employee benefit:

The CHOICE Arrangement (formerly ICHRA): You need qualified individual health insurance coverage to participate in the CHOICE Arrangement, formerly known as the individual coverage health reimbursement arrangement (ICHRA). Group coverage through a spouse's or parent's health plan doesn't qualify. The Internal Revenue Service (IRS) doesn't set employer contribution limits for a CHOICE Arrangement, so your employer can offer an allowance that fits its budget and your benefit needs.
The qualified small employer HRA (QSEHRA): The QSEHRA is available only to employees of eligible small businesses with fewer than 50 full-time equivalent employees (FTEs). To participate, you need health insurance that provides minimum essential coverage (MEC). Unlike a CHOICE Arrangement, coverage through a spouse's or parent's group health insurance plan can qualify. However, IRS regulations set annual limits on QSEHRA contributions, capping how much your employer can offer you each year.

If you don't have a CHOICE Arrangement (formerly an individual coverage HRA) or a QSEHRA, but your employer offers you an HRA, it’s likely either a group coverage HRA (GCHRA), also known as an integrated HRA, or an excepted benefit HRA (EBHRA). This type of HRA works alongside your employer-sponsored group health insurance. While it doesn't cover insurance premiums, your employer can reimburse you for qualifying out-of-pocket costs, such as expenses you incur before meeting your deductible.

2. How does an HRA work?

HRAs are relatively straightforward. At the beginning of the plan year, which may or may not be the same as the calendar year, your employer provides you with an allowance for qualified medical expenses. You receive reimbursements as you incur eligible expenses.

Here's how the process works:

You enroll in qualifying health coverage for your specific type of HRA.
You pay for qualifying medical items and services using your own money.
You submit a reimbursement request to your employer or HRA plan administrator, such as PeopleKeep by Remodel Health. With PeopleKeep, you can submit reimbursement requests through the software.
Your employer or plan administrator reviews the expense to determine whether it's eligible. With PeopleKeep, we review your reimbursement requests, while your employer approves the reimbursement amount.
You receive reimbursement for your qualified medical expense up to your available allowance.

Keep in mind that eligible expenses differ by HRA type and how your employer designed the benefit. For example, your employer might offer a premium-only CHOICE Arrangement (formerly ICHRA) or QSEHRA. With a premium-only HRA, you can only receive reimbursement for insurance and ancillary premiums.

3. What are the advantages of HRAs?

You're likely familiar with group health insurance, the traditional option for employer-sponsored plans. However, HRAs are becoming increasingly popular because they give employers greater control over their benefit budgets while offering employees more flexibility.

This modern health benefit also has advantages for employees:

Personalization. Group health insurance typically offers a limited selection of plans to an entire employee population. An HRA can give you more choice. Depending on the type of HRA your employer offers, you may be able to choose an individual health insurance plan that fits your needs, including your preferred doctors, pharmacies, and specialists.
Potential cost savings. Depending on your employer's HRA design, your monthly allowance may cover a variety of qualified medical expenses. In addition to your insurance premium, your employer might allow you to use your CHOICE Arrangement (formerly ICHRA) or QSEHRA allowance for other qualified medical expenses, such as copays for doctor visits. A GCHRA can help cover eligible out-of-pocket expenses associated with your employer's group health plan.

4. What healthcare expenses can HRAs cover?

The specific expenses covered by an HRA depend on your employer's plan design, but they typically include more than 200 qualified medical expenses in Internal Revenue Code Section 213(d). The federal government outlines these in IRS Publication 502 ¹ and the CARES Act².

Here are a few example healthcare expenses eligible for reimbursement:

Individual insurance premiums for health, dental, and vision plans (with a stand-alone HRA like a QSEHRA or CHOICE Arrangement [formerly ICHRA])
Medical deductibles
Dental care
Vision care
Prescription drugs
Over-the-counter medications

Your employer determines which eligible expenses its HRA will reimburse, subject to the rules that apply to the specific type of HRA. For example, your employer may choose to reimburse only health insurance premiums. For that reason, refer to your specific HRA plan documentation to understand exactly which healthcare costs your employer's plan covers.

5. Are fund rollovers permitted with an HRA?

Whether you can roll over HRA funds each year depends on your employer's plan design and the HRA administrator they work with. Some employers allow fund rollovers, while others don't. Employees should check their plan's specifics to see whether they can accumulate funds over time or must use them within the plan year. With PeopleKeep by Remodel Health, we allow monthly HRA rollovers until the end of the plan year. Unused HRA funds stay with your employer.

6. Is an HRA taxable for employees?

Employee reimbursements are tax-free provided the employer administers the benefit correctly, and employees have qualifying health coverage. What your employer offers through an HRA isn't taxable income, so you won't have to pay federal, state, or payroll taxes on the reimbursements you receive for qualified medical expenses. This is another advantage that makes HRAs an attractive option for employees.

The exception is that a QSEHRA allows taxable reimbursements for a spouse's employer-sponsored group plan³. This is known as employer-sponsored premium reimbursement (ESPR).

7. What happens to your HRA if you leave your current employer?

If you leave your employer, your HRA funds won't go with you. Unused HRA funds stay with your employer. With a QSEHRA or CHOICE Arrangement (formerly ICHRA), your individual insurance plan is portable, but you'll no longer receive reimbursements for your monthly premiums.

8. How is an HRA different from an HSA?

Employees often confuse HRAs and health savings accounts (HSAs). However, they're two separate health benefits that each work a little differently. Depending on your circumstances, they can even work together.

The major differences between HRAs and HSAs are:

Who owns the account. Employers own HRAs. Employees own HSAs.
Who funds the account. Only the employer makes HRA contributions, but both you and your employer can contribute to an HSA.
What kind of health plans work with the benefit? To participate in an HSA, an employer must be enrolled in an HSA-qualified plan, such as a high deductible health plan. With an ICHRA, you need a qualified individual health insurance plan. With a QSEHRA, you only need an ACA-compliant plan that provides MEC. A GCHRA requires you to participate in your employer's ACA-compliant group plan.
Who keeps employer contributions when you leave the company? After an employee leaves their job, their remaining HRA allowance stays with the organization. HSA contributions stay with the employee.

9. Can you use an HRA alongside other health benefits?

You can use HRAs alongside health accounts like HSAs or flexible spending accounts (FSAs). However, because each employer's plan is unique, you need to understand how these accounts can work together to maximize their benefits. For example, using a QSEHRA alongside an HSA limits the QSEHRA to reimbursing only monthly premiums and excepted benefits, like dental or vision costs. But a CHOICE Arrangement (formerly ICHRA) and an HSA limit the CHOICE Arrangement to reimbursing only insurance premiums.

Learn more about how HRAs and HSAs work together.

10. How do you get an individual health insurance policy?

You can purchase an individual health insurance policy on your own through the Health Insurance Marketplace. You can also work with a health insurance broker or go directly to a health insurance company.

If your employer has PeopleKeep by Remodel Health as its QSEHRA or CHOICE Arrangement (formerly ICHRA) plan administrator, it's even easier. You can shop for a qualifying individual health insurance plan right from your account.

11. Can I use my HRA to pay for my family's healthcare expenses?

Generally, yes, as long as they have qualifying health coverage. However, it depends on how your employer designed the HRA. Some HRA plans allow you to use your allowance to reimburse eligible healthcare expenses for your spouse and dependents, while others may only cover expenses for you. Check your HRA plan documents to see whose expenses are eligible for reimbursement.

12. Do I have to use all my HRA funds each month?

No, you don’t have to use all of your HRA funds each month. However, not using your employer’s HRA funds is leaving money on the table. Whether unused HRA funds roll over depends on your employer's plan design. Some employers allow funds to roll over from month to month or year to year, while others require you to use your allowance within the plan year. Check your plan documents to understand your HRA's rollover rules.

If your HRA reimburses you for out-of-pocket medical care expenses and you have leftover funds near the end of the plan year, check out our article for some tips on how to spend your allowance.

Conclusion

Understanding how your health reimbursement arrangement (HRA) works can help you get the most out of your employee benefit. Depending on your employer's plan design, an HRA can help reduce your out-of-pocket expenses while giving you more flexibility in how you choose and pay for health coverage.

By understanding what's eligible, how reimbursements work, and how your HRA interacts with other benefits, you can make more informed decisions about your healthcare spending and take full advantage of the benefit your employer provides.

This article was originally published on May 28, 2013. It was last updated on September 28, 2026.