What employers need to know about HRA debit cards

Written by: Gabrielle Smith
Originally published on April 14, 2021. Last updated April 16, 2021.

Many third-party administrators promote health reimbursement arrangement (HRA) debit cards as an option for employees to pay for their medical expenses they want covered through their HRA.

While using an HRA debit card may seem like a more convenient option than paying for expenses out of pocket, HRA debit cards come with their own hassles that make them a less attractive choice.

Let’s go over a few things you need to know before handing out HRA debit cards to your employees, and explore another—more hassle-free—option to administer your HRA.

HRA debit cards create overpayment problems

The appeal of an HRA debit card is that employees have immediate access to their HRA funds, rather than having to pay for their medical expenses with their own money and getting reimbursed later.

However, having your employees use their HRA dollars to pay at the time of service makes it easy for overpayment problems to come up that’s confusing for you, your employee, and their healthcare provider. This example explains it best:

Let’s say your employee goes to the doctor and is charged $300 for their visit, which they pay in full with their HRA debit card. A few days later, their insurance provider sends a bill for $200, incorporating the discounts the insurance company had negotiated with their doctor.

The employee then needs to submit a claim for the $200 shown on the bill, but there’s a problem—you’ve already paid $300 from the HRA debit account. Now your employee has to contact the medical provider, get the dollar amount overpaid, and provide it to you.

HRA debit cards require employees to submit manual claims

In order to maintain compliance, an employee is required to submit a manual claim form with proper substantiation each time they use their HRA debit card.

What counts as “proper substantiation” will depend on what your employee is trying to buy. If they want to use their HRA debit card for over-the-counter drugs, they’ll need to get a doctor's prescription and a receipt from the pharmacy to submit to the third-party administrator.

While some IIAS compliant pharmacies can bypass the manual claim requirement, the majority of healthcare providers still require it—which just makes things that much more confusing for your employee.

All of this is a burden on your employee, but also on you if they don’t submit the required information. It’s then up to you to get it from them—otherwise the reimbursement won’t go through.

Not everyone accepts HRA debit cards

Even if your employee is trying to pay for a product or service that’s HRA-qualified, some places won’t allow them to use their HRA debit card. That’s because doctor offices, pharmacies, and other medical providers aren’t legally required to accept HRA debit cards.

As if using an HRA debit card wasn’t complicated enough already, some places will accept your HRA debit card even if you’re buying things that aren’t HRA-qualified.

For example, let’s say your employee picks up some snacks at the pharmacy while they’re waiting for their prescription to be filled, and they accidentally swipe their HRA debit card instead of their own debit card. That purchase will go through, and your employee will be responsible for paying that money back to their account.

HRA debit cards can’t process payments over the allowance amount

Wondering what happens if your employee has a charge that’s more than the amount remaining on their HRA debit card? The card simply gets declined.

So even if they still have $100 left on their card, if they try to pay for a product or service that costs $115, the card won’t process the payment. While your employee can certainly pay for the charge out of pocket and submit it for reimbursement later, if they don’t have another method of payment with them at the time, then they’re just out of luck.

This means employees have to keep a close eye on how much money is left on their HRA debit card, otherwise they could end up with no way to pay for what they need.

Employers don’t get to personalize the benefit with an HRA debit card

When employers offer an HRA without a debit card, employers have all sorts of options to personalize the HRA for their employees’ unique needs. However, these personalizations aren’t allowed when used with a debit card.

For example, with an HRA debit card, you aren’t able to vary the allowance amounts for different classes of employees. So if you want your full-time employees to have a certain allowance while your part-time employees have another, an HRA debit card won’t work.

What’s more, if you want a premium-only HRA that doesn’t cover any additional medical expenses, employers aren't able to restrict the card’s usage to allow for this. The card has to be used however it was set up by the administrator—no exceptions.

A better alternative to HRA debit cards

Now that you understand some of the hidden hassles associated with HRA debit cards, let’s introduce you to a better way—HRA administration software.

If you like the convenience of HRA debit cards but want to avoid the extra complications, an HRA administration software is the best of both worlds. A good administrative tool will give your plan administrator the training and ongoing support needed to keep your HRA compliant and functioning smoothly.

For a simple and compliant way to administer your organization’s HRA, consider PeopleKeep’s software and award-winning customer support team. We’ve helped thousands of employers throughout the United States administer three unique HRAs:


First up is the qualified small employer HRA (QSEHRA). This plan works best for employers with fewer than 50 full-time equivalent employees that don’t have group health insurance in place.

Learn what it takes to administer a QSEHRA on your own


Next is the individual coverage HRA (ICHRA). This is a great option for employers of all sizes who want their HRA to work as a stand-alone benefit or alongside group health insurance.

Learn what it takes to self-administer an ICHRA


Finally, there’s the group coverage HRA (GCHRA). This HRA is designed for small to midsize employers who already have a group health insurance plan set up and want to use the HRA as an extra benefit for their employees.

Download our comprehensive guide to offering a GCHRA


At first glance, HRA debit cards seem like a smart option to help your employees get their medical expenses reimbursed. However, setting up an HRA administration software gives you the convenience and flexibility you need without the added time, money, and frustration that HRA debit cards inevitably bring.

This article was originally published February 8, 2021. It was last updated April 14, 2021.

Originally published on April 14, 2021. Last updated April 16, 2021.


Additional Resources

View All Resources