hra

What is it?

Health Reimbursement Arrangements (HRA) are employer-funded plans that reimburse employees for certain out-of-pocket medical expenses. You must submit paperwork in order to receive a reimbursement.

How does it benefit me?

  • You may save money on insurance premiums deducted from your pay. Typically, these plans are used in conjunction with High Deductible Health Plans (HDHP), i.e. High Deductible (higher out-of pocket) = Lower insurance premium.
  • With a decrease in insurance premiums, your out-of-pocket medical expenses are likely to increase. The HRA is designed to reimburse you for the increased out-of-pocket expenses.
  • Any HRA reimbursements are not taxable income to you.
  • Depending on your employer’s plan, charges incurred by your covered dependents may be eligible for reimbursement.

What else do I need to know?

  • Anyone enrolled in the group’s medical plan is eligible to enroll in the HRA.
  • All medical deductibles and out-of-pocket coinsurance expenses accumulate on a calendar year basis regardless of when your medical plan renews.
  • You will need to complete and submit an HRA claim form and required EOBs for reimbursement.
  • You may submit multiple claims for reimbursement during the Plan Year, but no later than 60 days after the end of a Plan Year.

How a Healthcare Reimbursement Arrangement Works

There are two types of HRAs: Medical Deductible Reimbursement and Medical Coinsurance Reimbursement.  Here’s how they work.

Medical Deductible Reimbursement

Many HRA plans reimburse medical deductible expenses above a set limit. When you receive medical care, you will be billed by your medical provider (physician, hospital, etc). Your insurance company will determine how much of the charges are applied toward your medical deductible. You may also be required to pay office visit co-pays, which are not eligible for reimbursement under the HRA.

How does a medical deductible reimbursement HRA work?

Below is an example of an HRA medical deductible reimbursement plan design:

  • You and your dependents enrolled in the medical plan must pay out-of-pocket the first $500 of the individual medical deductible (up to $1,500 annual maximum for covered family).
  • The HRA will reimburse the remainder of the individual medical deductible up to $2,000 for each covered family member (up to $6,000 for covered family).
Medical Insurance Coverage Employee Deductible Responsibility HRA Deductible Responsibility Total Medical Deductible
Employee Only First $500 Next $2,000 $2,500
Employee + Spouse First $500 Each ($1,000 family max) Next $2,000 each ($4,000 family max) $5,000 (family max)
Employee + Child(ren) First $500 each ($1,500 family max) Next $2,000 each ($6,000 family max) $7,500 (family max)
Employee + Spouse + Child(ren) First $500 for each covered person up to $1,500 family max Next $2,000 for each covered person up to $6,000 family max $7,500 (family max)

You will need to keep all Explanation of Benefits (EOB) from your insurance company. Watch the calendar year-to-date accumulator for your individual medical deductible met so far in the calendar year. Most HRA plans ask that you meet a certain amount of the deductible. When that accumulator goes over that limit, you are eligible for a reimbursement.

Medical Coinsurance Reimbursement

Some HRA plans reimburse coinsurance expenses. A coinsurance expense occurs when the insurance company pays a percentage of a medical expense (80% is common) and you are responsible for the remaining balance (20% in this example). Some medical plans require that you meet the medical deductible before charges are applied toward coinsurance, while other plans apply certain medical expenses toward coinsurance before the medical deductible has been met. Look at the EOB details to see if the expense is listed under the deductible or coinsurance column.

Unfortunately, most EOB’s do not track coinsurance cumulatively so if your HRA reimburses coinsurance, you have to keep every single EOB showing coinsurance expenses and submit all of them for reimbursement.

How does a medical coinsurance reimbursement HRA work?

Below is an example of an HRA medical coinsurance reimbursement plan design:

  • The HRA will pay the first $1,000 of coinsurance expenses for each covered family member (up to $3,000 for covered family).
  • You are responsible for the remaining coinsurance expenses for each covered family member.

Medical Insurance Coverage HRA Coinsurance Responsibility Employee Coinsurance Responsibility Total Medical Coinsurance
Employee Only First $1,000 $2,000 $3,000
Employee + Spouse First $1,000 Each ($2,000 family max) $2,000 each ($4,000 family max) $6,000 (family max)
Employee + Child(ren) First $1,000 each ($3,000 family max) $2,000 each ($6,000 family max) $9,000 (family max)
Employee + Spouse + Child(ren) $1,000 for each covered person up to $3,000 family max $2,000 for each covered person up to $6,000 family max $9,000 (family max)

For medical coinsurance reimbursement you will need to keep all Explanation of Benefits (EOB) from your insurance company. Your individual coinsurance is not tracked in the EOB Summary. You must submit each EOB that shows the charges applied toward your individual coinsurance.