What is a health reimbursement account (HRA)?

A health reimbursement account or arrangement (HRA) is true to its name: Your employer funds the account so you can reimburse yourself for certain medical, dental or vision expenses. As an account-based health plan, an HRA can help you stretch the value of your health care dollar for eligible health care expenses and over-the-counter items.

How do HRAs work?

Your employer owns your HRA and sets it up for you. It’s a different arrangement than a flexible spending account or health savings account, when you contribute money.

  • Your employer sets the rules and decides the amount. You are not allowed to make contributions to your HRA.
  • Your employer decides the list of medical expenses that will be covered. Most employers set up HRAs for their employees to pay for expenses not typically paid for by health plans — medical and pharmacy expenses that may be paid out-of-pocket before meeting a deductible, as well as coinsurance after meeting a deductible.
  • There can be tax advantages. Your reimbursement for eligible medical expenses is generally not considered taxable income. You usually receive the full amount, and don’t have to pay federal or state income taxes on the money.
  • Use it or you might lose it. Your employer can set up the plan so that unused HRA funds roll over from year to year. This isn’t a requirement, though. If you leave your employer and have unused funds in your account, they can keep the money.

How can I use the money in my HRA? What can I buy?

You can use the funds in your HRA to pay for eligible medical expenses, as determined by the IRS and your employer. Some employers may only allow the HRA to pay for services covered by your health plan. Some employers may also let you use funds in the account to pay for dental, vision or other services. Some of the more common expenses that HRAs can help pay for include:

  • Monthly premium payments

  • Payments toward a deductible

  • Copays

  • Routine doctor’s visits

  • Hospital expenses

  • Dental care

  • Blood pressure monitors

  • Vision care, including eyeglasses, contact lenses and exams

  • Over-the-counter medicine and drugs

  • Prescription drugs

  • Blood glucose monitors

How do I access my HRA money?

Your employer decides how you’ll access your HRA, but it will likely be one of the following methods:

  • You won’t do anything — most plans will reimburse your network doctor directly
  • You’ll use a debit card tied to the account, if offered by your employer
  • You’ll pay for expenses up front, then request reimbursement

How do I enroll in an HRA?

You can enroll in an HRA, if offered by your employer, during your open enrollment period. Outside of open enrollment, you can sign up when you first join a company or if you experience a qualifying life event.

For more information and to learn if this account is available to you, contact your employer.

If you’ve experienced a qualifying life event, please call the number on your member ID card.

The differences between HSAs, HRAs and FSAs

How do I get an HSA?

You must have a high deductible health plan that meets a deductible amount set by the IRS to be eligible.

Who funds an HSA?

You do. You contribute pre-tax money via payroll deductions, with a maximum of $3,550 for self only and $7,100 or families for 2020. These amounts generally change every year. Your employer, family and others can put money into it if they choose. Any unused funds continue to roll over year to year. Like any personal savings account, there’s no limit to how much you can save over time.

How can I spend the money?

It can only be used for qualified medical expenses. This does not include paying for premiums.

What happens if I leave my job?

If you leave your job, you can take your HSA with you. (Once you’ve established an HSA, it’s yours forever.)

What are the tax advantages?

Tax benefits include tax deductible contributions and account holders can build up their HSA by earning tax-free interest as well as tax-free returns from investing their funds.

Can I use my HSA, HRA and FSA together?

The simple answer is this: It depends on your circumstances. There’s no easy or “right” answer. It gets tricky due to the possibility of double-dipping.

Using an FSA + HRA together

You can use an FSA and HRA together. If you have an FSA, expenses typically come from that account first. Funds from the HRA are then used to cover other medical expenses.

Using an FSA + HSA together

It’s uncommon to have an FSA and HSA at the same time, but not impossible. One exception to this rule is pairing an HSA with a limited-purpose FSA (also called an HSA-compatible FSA, or post-deductible FSA). In this case, you can use your limited-purpose FSA only for certain expenses, like dental or vision care, until you reach your health plan’s deductible. By tapping into your limited-purpose FSA first, you can save more of your HSA dollars for future expenses.

Using an HRA + HSA together

You can use an HRA and an HSA at the same time if you are enrolled in a high deductible health plan (HDHP), but the IRS has specific rules as to how they work together. For example, you can’t use HSA funds to cover medical expenses that were reimbursed by your employer in an HRA. You can also use them together if you opt out of your HRA reimbursement of qualified medical expenses (you can keep reimbursement for premiums). Review your health plan details to learn more.

Disclaimer

UnitedHealthcare does not provide tax advice and you should contact a tax advisor for your specific situation.