Health reimbursement arrangements (HRAs) are becoming extremely popular and common in today’s workforce. HRAs are employer funded and IRS approved benefits that reimburse employees for any out of pocket expenses that are not covered by their insurance plan. This is a great alternative to utilize, which coincides with traditional health benefit plans.
Even though the concept looks straightforward by definition, it can be a bit confusing when diving into the details. If you are on the fence about whether or not HRAs are the best route for you to go, here are the top 7 frequently asked questions amongst employees who are considering this option.
- Who is in charge of the HRA money?
When it comes to money, the first question that many employees ask is who is in charge and properly handling it. It can be easy to confuse HRAs with flex spending accounts (FSA) or health savings accounts (HSA). When it comes to FSAs and HSAs, you as the employee are responsible for your own account and contributions.
For HRAs, the money offered is directly managed and owned by your employer, or is outsourced to a trusted third party administrator. It is important to note that you are restricted from making your own monetized contributions to your HRA. When you request a medical reimbursement, you will generally get a specific allowance back in your paycheck. You could also receive it by a separately issued check, cash or an ACH transfer.
- What is the HRA reimbursement process?
When it comes to obtaining a reimbursement, you must be able to verify your medical expenses through detailed documentation. This paperwork needs to have the total cost, expense type and the date it was issued to start the process. Whether your paperwork is one page or multiple pages, make sure to provide all of it to your employer or third party administrator.
- What kind of expenses are reimbursable?
Many medical alleviating and prevention expense categories are eligible for reimbursement through HRAs. Here is a list of the most common categories covered:
- Regular Doctor Visits and Hospital Care
- Dental and Vision Services
- Medical Prescriptions
- Health Insurance Premiums
- Miscellaneous Products (first aid kits and bandages)
- Emergency Services
Since there are different HRA types, make sure to consult with your employer for more coverage clarification.
- When will I receive my reimbursement?
After you did your due diligence and submitted your paperwork, you will typically get your reimbursement within 30 days. For more information on your particular situation, you should get in touch with your employer or third party administrator for precise timeframe estimates.
- How does this effect my tax credit?
If you have an HRA and your own individual insurance coverage, there is a good change you will be eligible to obtain a federal subsidy, called a premium tax credit that will assist in paying your insurance premium. To give you more insight, here are the most frequent HRA tax credit offerings:
- ICHRA – An important thing to note here is that you cannot receive both a tax credit and be involved in the ICHRA at the same time. You must choose between the two options that works the best for your situation.
- QSEHRA – If you are offered a QSEHRA and are eligible for a tax credit, your credit should be reduced to the amount of allowance you are offered, regardless of reimbursement amount.
- Group HRA (integrated HRA) – This HRA is used to work simultaneously with a group health insurance, meaning that tax credits are not considered in this circumstance.
- Excepted Benefit HRA – Excepted Benefit HRAs cannot consider tax credits either due to restricted reimbursement offerings of major medical insurance premiums.
- Can I take my allowance with me if I leave?
For FSAs and HSAs, you can certainly take the money with you if you decide to leave the company, but that is not the case with HRAs. Your employer owns your HRA. This unfortunately means that the allowance belongs to them and you cannot take it with you if you decide to depart.
- Does HRA allowance roll over each year?
Since your HRA is in the hands of your employer with their own set of guidelines, there is no direct answer if your allowance will roll over or will be lost if you do not use it by the end of each year. If not rolled over, employers are required to establish a runout period for employees to have the opportunity to submit for their reimbursement before the funds are no longer available.
Make sure to set up an HRA meeting with your management team to go over this question to establish if you get to keep your money each year or if you have to use it within a certain allocated timeframe.