What Can I Buy With a Health Reimbursement Arrangement (HRA)?

Health Reimbursement Arrangements (HRAs) are employer-funded accounts that help employees manage healthcare costs. They are tax-advantaged ways for employers to reimburse employees for qualified medical expenses. The specific expenses covered by an HRA are determined by the employer’s plan design, which must align with Internal Revenue Service (IRS) guidelines.

General Principles of HRA Eligibility

HRA reimbursement requires an expense to be a “qualified medical expense” as defined by the IRS. According to IRS Publication 502, these are costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any structure or function of the body.

An employer’s specific HRA plan document dictates which IRS-eligible expenses are covered. Employers have discretion to narrow the scope of reimbursable expenses beyond general IRS guidelines. Employees must provide substantiation, such as itemized receipts or an Explanation of Benefits (EOB), to verify the expense was incurred and qualifies under the plan.

Common Reimbursable Medical Expenses

Many common healthcare costs are eligible for HRA reimbursement under IRS guidelines. This includes payments for doctor visits, whether for primary care physicians, specialists, or mental health professionals. Prescription medications and insulin purchases are generally covered, as are a wide range of dental services such as cleanings, fillings, root canals, orthodontia, and dentures.

Vision care expenses, including eye exams, eyeglasses, contact lenses, and corrective eye surgeries like LASIK, are usually reimbursable. Hospital services, medical procedures, laboratory tests, and X-rays are qualified medical expenses. Services like acupuncture and chiropractic care are eligible when medically necessary for treatment.

Medical equipment and supplies, such as crutches, wheelchairs, bandages, and blood sugar testing kits, are typically covered. Certain over-the-counter medications and supplies became eligible for reimbursement without a prescription following changes introduced by the CARES Act, though some plans may still require a doctor’s note for specific items. Travel expenses incurred primarily for medical care, such as mileage to and from appointments, parking fees, or public transportation fares, can also be reimbursed. Medically necessary programs like smoking cessation programs or weight-loss programs for a specific medical condition diagnosed by a doctor are often eligible for coverage.

Expenses Not Eligible for HRA Reimbursement

Expenses for cosmetic procedures are not eligible unless they are necessary to correct a deformity resulting from a congenital abnormality, personal injury, or disfiguring disease. Purely elective cosmetic surgeries or procedures are typically excluded from reimbursement.

General health items, such as vitamins, nutritional supplements, toiletries, or gym memberships for general health improvement, are usually not reimbursable unless prescribed for a specific medical condition. Childcare expenses, funeral costs, or expenses for illegal operations or treatments are not qualified medical expenses. Expenses that have already been reimbursed by another health plan, such as a health savings account (HSA) or flexible spending account (FSA), cannot be covered again by an HRA.

The HRA Reimbursement Process

The process for receiving reimbursement from an HRA begins after an employee incurs an eligible medical expense. The next step involves gathering the necessary documentation, which commonly includes an itemized receipt from the service provider or pharmacy, detailing the date, service, and amount paid. For expenses covered by a health insurance plan, an Explanation of Benefits (EOB) statement from the insurer is often required, as it shows the amount paid by the insurance and the remaining patient responsibility.

Once the documentation is assembled, the employee completes a claim form provided by the HRA administrator. This form, along with the supporting documents, is submitted through an online portal, a dedicated mobile application, mail, or fax. After submission, the HRA administrator reviews the claim for eligibility and completeness, with processing times typically ranging from a few business days to approximately two weeks. Reimbursement is commonly issued via direct deposit into the employee’s bank account or through a mailed check.

How Different HRA Types Affect What You Can Buy

The specific type of HRA offered by an employer influences the range of expenses eligible for reimbursement. A Qualified Small Employer HRA (QSEHRA) allows eligible small employers who do not offer a traditional group health plan to reimburse employees for individual health insurance premiums in addition to other qualified medical expenses. This expands the scope to include a major healthcare cost that is typically excluded from standard HRAs.

An Individual Coverage HRA (ICHRA) provides flexibility, enabling employers of any size to reimburse employees for individual health insurance premiums and other qualified medical expenses. This type of HRA can serve as an alternative to offering a traditional group health plan, providing employees with choice in their insurance coverage. An Excepted Benefit HRA has a limited scope, typically used alongside a traditional group health plan to cover specific benefits like dental, vision, or short-term, limited-duration insurance premiums, but not comprehensive medical expenses or major medical plan premiums.

A standard, or Integrated HRA, works in conjunction with a group health plan and primarily covers cost-sharing expenses such as deductibles, co-pays, and coinsurance after the primary health plan has paid its portion. Unlike QSEHRAs and ICHRAs, Integrated HRAs generally do not reimburse health insurance premiums. The specific HRA type is a key factor in determining the full spectrum of reimbursable expenses available to an employee.

References

1. Internal Revenue Service. Publication 502, Medical and Dental Expenses. [https://www.irs.gov/publications/p502]
2. Internal Revenue Service. Certain Medical Expenses Now Qualify for Reimbursement. [https://www.irs.gov/newsroom/certain-medical-expenses-now-qualify-for-reimbursement]
3. U.S. Department of Labor, Employee Benefits Security Administration. Health Reimbursement Arrangements (HRAs). [https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/fact-sheets/health-reimbursement-arrangements.pdf]
4. Internal Revenue Service. Fact Sheet: Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). [https://www.irs.gov/newsroom/fact-sheet-qualified-small-employer-health-reimbursement-arrangements-qsehras]
5. Centers for Medicare & Medicaid Services. Individual Coverage Health Reimbursement Arrangement (ICHRA). [https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Individual-Coverage-HRA]