Health Reimbursement Arrangement (HRA)

What is an HRA?

Health Reimbursement Arrangements consist of funds set aside by employers (and only by the employer) to reimburse employees for qualified medical expenses, just as an insurance plan will reimburse covered individuals for the cost of services incurred.

24/7 Online Access
No Minimum Monthly Fees
2 Business Day Claim Turnaround
20-30% Annual Premium Savings*
Coordinate with a Cafeteria Plan for even more savings!

Advantages & Key Points

Carry-Over of Unused Coverage: One of the most significant features of HRAs is that they can allow the unused portion of the plan coverage to be carried over to subsequent coverage periods.
Favorable Tax Treatment: Coverage under an HRA and expenses reimbursed through the HRA are excludable from the covered individual's gross income.
Retirees May Be Covered: An HRA may cover both current and former employees (including retirees) and their spouses and tax dependents. The surviving spouse and dependents of a deceased employee may also be covered.

Solely an Employer-Paid Benefit: An HRA must be paid solely with employer dollars. It cannot be paid for, directly or indirectly, through employee salary reduction elections, and it cannot be provided through the employer's cafeteria plan.
COBRA: An HRA is considered a "group health plan" for purposes of the health care continuation coverage requirements under COBRA.
Nondiscrimination Rules Apply: An HRA must comply with tax rules that prohibit discrimination in favor of highly compensated individuals with respect to eligibility, contributions or benefits. As a result, HRAs could not be offered to only high-paid executives.

Alternative Funding Case Study

PROBLEM: Employer receives a 12.3% increase on Group Health Plan Premium, the fourth year of double-digit increases.

DILEMMA: In the past, Employer has made the choice of cutting benefits and/or charging employees for a portion of the increase. The Employer acknowledges this is not a solution.

ANALYSIS: After a detailed review of Group Health Plan and survey of employees, it was determined that the majority of the plan usage was office visit and prescription related.

SOLUTION: Alternative Funding... the Employer contracts with an Insurance carrier for a high-deductible to the employees. The different between these two deductibles, the employer reimburses eligible expenses to the employee and/or their dependents.

RESULTS: Employer reduces their first year cost by 16.8%, continues to offer a Group Health Plan the employees and their dependents can appreciate, and for the first time, has a long-term answer.

WHAT YOU SHOULD KNOW... On average 70% of your employees' annual medical plan deductible expenses will be LESS THAN $500... Let us show you how Alternative Funding can benefit your company.

Important documentation about Health Reimbursement Arrangements

Notice 2002-45
Letter 9409006
Rev. Rul. 71-588
Oregon's bulletin about individual insurance premiums not being eligible to be reimbursed through a HRA
Rev. Rul. 2003-102
Publication 969 from IRS website