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Small Business Employee Benefits and HR Blog

What Can Health Reimbursement Arrangements (HRAs) Reimburse?

What an HRA can reimburse

Health Reimbursement Arrangements (HRAs) are a type of medical reimbursement plan used to reimburse employees’ medical expenses tax-free.

Whether your company currently offers an HRA, or you are researching ways to help employees with medical expenses, a common question is, “What, exactly, can an HRA reimburse?”

The IRS sets the guidelines for eligible medical expenses an HRA can reimburse. Additionally, employers may elect which IRS-qualified expenses not to reimburse. Let’s take a look at how this works.

HRA Eligible Medical Expenses

An HRA can reimburse for eligible medical expenses and health insurance premium amounts, as defined by the IRS (see IRC Section 213(d) and IRS Publication 502).

What is a medical expense? According to the IRS, a medical expense is “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.”

According to this definition, common medical expenses which can be reimbursed through an HRA include:

  • Acupuncture

  • Ambulance

  • Chiropractor

  • Contact Lenses

  • Dental Treatment

  • Vision Expenses

  • Hospital Services

  • Insurance Premiums

  • Laboratory Fees

  • Pharmaceutical Drugs

  • Doctor Visit Co-pays

  • Surgery

  • Smoking Cessation

  • Therapy

For a full list of eligible and ineligible HRA expenses, download this free PDF list.

Employer Customization of Expense Categories

Within the IRS guidelines, employers may elect which categories of qualified expenses to reimburse (or not reimburse).

For example, an employer may set up an HRA to reimburse only out-of-pocket medical expenses not covered by their group health insurance plan.

It is also helpful to note that employers are customizing their HRAs (and other medical reimbursement plans) to be compliant with new Obamacare rules. In some cases, this includes modifying what is reimbursable or how the HRA is structured.

Unsure what your HRA can reimburse? The HRA Plan Documents will always specify what type of medical expenses are covered.

Related: Which Pre-Tax Healthcare Accounts are Available to Small Employers?

Conclusion

Understanding what an HRA reimburses is as simple as asking, “Is it an IRS-qualified medical expense?” And, “Does our company’s HRA reimburse this category of medical expense?”

Do you have questions about what an HRA can reimburse? Download this PDF list, or leave a question below.

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