The full form of HRA is “Health Reimbursement Arrangement.” An HRA is a type of employee benefit plan that provides reimbursement for qualified medical expenses incurred by an individual. It is typically sponsored by an employer and is designed to help employees pay for out-of-pocket medical expenses not covered by traditional health insurance.
An HRA is funded by the employer, and employees can use the funds in their HRA to pay for qualified medical expenses, such as co-payments, deductibles, and other eligible medical expenses. The funds in the HRA are not taxed, and the employee does not pay federal income tax on the reimbursement received.
HRAs come in different varieties, but the most common type is a “non-integrated HRA.” This type of HRA does not coordinate with other health coverage and is typically used to reimburse out-of-pocket expenses not covered by the employee’s health insurance. The employer determines the amount of funds that will be made available to each employee, and the funds do not carry over from year to year.
Another type of HRA is an “integrated HRA.” This type of HRA is designed to be used in conjunction with a high-deductible health plan and is intended to help employees pay for out-of-pocket expenses incurred under their health insurance. The funds in an integrated HRA may be rolled over from year to year and can be used to pay for future medical expenses.
In conclusion, an HRA is a type of employee benefit plan that provides reimbursement for qualified medical expenses incurred by an individual. It is typically sponsored by an employer and is designed to help employees pay for out-of-pocket medical expenses not covered by traditional health insurance. HRAs come in different varieties, and the most common type is a non-integrated HRA.