HRA FAQs For Employees

Are you trying to understand health reimbursement arrangements (HRAs) and how they benefit you as an employee? An HRA is a flexible tool that can help you manage the rising cost of medical care. But, as with anything that’s unfamiliar, HRAs can sometimes seem complex.

In this article, we'll provide answers to 10 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 reimburses you for qualified medical expenses. If your employer offers a stand-alone HRA, this includes your individual insurance premiums.

Your employer may offer you one of the following stand-alone HRAs:

• The individual coverage HRA (ICHRA): You need individual health insurance to participate in the ICHRA. Coverage through a spouse's or parent's group health plan doesn't count. The Internal Revenue Service (IRS) doesn't set limits on employer contributions, so your employer can offer you as much as they'd like as an allowance. This could mean more money for you.
• The qualified small employer HRA (QSEHRA): You need health insurance coverage that provides minimum essential coverage (MEC) to participate in the QSEHRA. Unlike the ICHRA, coverage through a spouse's or parent's group health plan does qualify. But the IRS sets annual limits on employer contributions with the QSERHA, which means what your employer can offer you is capped at a certain amount.

If you don’t have an ICHRA or QSEHRA, your employer is likely offering you a group coverage HRA (GCHRA). This type of HRA pairs with your employer-sponsored group health insurance. While it doesn’t cover insurance premiums of any kind, your employer can reimburse you for out-of-pocket medical expenses, like any costs before you meet 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 a certain amount of money for qualified medical expenses. They reimburse you as you incur them.

Here's how the process works:

• You pay for qualifying medical items and services using your own money.
• You submit a request for reimbursement form to your employer or HRA plan administrator, such as PeopleKeep by Remodel Health. With PeopleKeep, you can easily submit reimbursement requests through our software.
• Your employer or plan administrator approves the qualified medical expense. With PeopleKeep, we review your reimbursement requests instead of your employer. Your employer simply approves the amount.
• You receive reimbursement for your qualified medical expenses up to your allowance amount.

Keep in mind that eligible expenses differ by type of HRA and how your employer designed the benefit. For example, your employer might offer a premium-only ICHRA or QSEHRA. With a premium-only HRA, you can only get reimbursed 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 among employers because of the tax advantages and budget control they provide.

This modern health benefit also has advantages for employees:

• Personalization. Group health insurance lumps you into a one-size-fits-all group health plan. It doesn't consider your individual needs. An HRA gives you the power of choice. You can choose your own individual health insurance plan that works for you. This means being able to choose a plan that works with the doctors, pharmacies, and specialists you prefer.
• Cost savings. Depending on how your employer designed the HRA, the monthly allowance your employer offers you covers a variety of qualified medical expenses. In addition to covering your insurance premium, your employer might allow you to use your ICHRA or QSEHRA allowance to pay for other qualified medical expenses, such as copays for doctor visits. A GCHRA only covers out-of-pocket expenses.

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 outlined in IRS Publication 502.

Here are a few healthcare expenses eligible for reimbursement:

• Individual insurance premiums for health, dental, and vision plans
• Medical deductibles
• Dental care
• Vision care
• Perscription drugs
• Over-the-counter medication

Despite IRS regulations, your employer has final say over what they'll reimburse. They may only want to reimburse you for insurance premiums alone. For that reason, you should refer to your specific HRA documentation to understand precisely what medical expenses are covered under your employer's plan.

5. Are fund rollovers permitted with an HRA?

An annual HRA fund rollover depends on your employer's plan design and the HRA administrator they work with. Some employers may allow a fund rollover, while others may not. Employees need to check their plan's specifics to understand if they can accumulate funds over time or need to use them within the plan year. With PeopleKeep by Remodel Health, we only permit monthly rollover of HRA funds until the end of the plan year. Unused HRA funds stay with your employer.

6. Is an HRA taxable for employees?

Reimbursements are tax-free for employees. What your employer offers you through an HRA isn't considered taxable income, which means 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 to this is that a QSEHRA allows for taxable reimbursements for a spouse’s employer-sponsored group plan.

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

If you leave your employer, your HRA won't go with you. Unused HRA funds stay with your employer. What is portable is your individual insurance plan, but you'll no longer receive reimbursements for your insurance 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.

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. In order 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 an individual health plan. With a QSEHRA, you need a plan that provides MEC. A GCHRA requires you to participate in your employer’s 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 HRA to only reimbursing you for insurance premiums and excepted benefits, like dental or vision costs. But, having an ICHRA and an HSA limits the ICHRA to only reimbursing you for insurance premiums.

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 as its plan administrator, it's even easier. You can shop for a qualifying individual health insurance plan right from your PeopleKeep account.

Conclusion

To get the most out of your health reimbursement arrangement (HRA), you need to understand how it works. This modern employee benefit aims to reduce your medical expenses while empowering you to choose a plan tailored to your needs. By getting answers to some of the most commonly asked questions about HRAs, you can confidently take advantage of this benefit and make informed healthcare spending decisions.

This article was originally published on May 28, 2013. It was last updated August 29, 2025.