A Health Reimbursement Arrangement (HRA) is an employer-funded account that reimburses you for qualifying medical expenses, tax-free. Unlike a Health Savings Account (HSA), you don’t contribute your own money. Your employer sets aside a fixed dollar amount for you each year, and you submit claims to get reimbursed from that balance when you pay for eligible healthcare costs.
How the Reimbursement Process Works
The basic cycle is straightforward: you pay for a medical expense out of pocket, submit proof of that expense to your HRA administrator, and receive reimbursement from your HRA balance. Every expense you submit must be substantiated, which typically means providing an itemized receipt, an Explanation of Benefits from your insurer, or a pharmacy printout showing the date, provider, and amount paid. A credit card statement alone usually isn’t enough because it doesn’t show what the charge was for.
Most HRA administrators now offer online portals or mobile apps where you can upload documentation and track your remaining balance. Some plans also issue debit cards linked to your HRA, which can pay providers directly at the point of sale. Even with a debit card, you may still need to submit receipts afterward to verify the expense was eligible.
What Expenses Qualify
HRAs can reimburse the same broad category of medical expenses the IRS recognizes under its rules for medical deductions. This covers costs related to diagnosing, treating, or preventing disease. Common eligible expenses include:
- Doctor and specialist visits: fees for physicians, surgeons, dentists, chiropractors, psychiatrists, psychologists, and osteopaths
- Prescription drugs and insulin
- Dental care: cleanings, X-rays, fillings, braces, extractions, and dentures
- Vision care: eye exams, glasses, contact lenses, cleaning solutions, and laser eye surgery
- Hospital and nursing services: inpatient care, nursing home costs related to medical treatment
- Medical equipment: hearing aids, crutches, wheelchairs, blood sugar test kits, oxygen equipment
- Transportation for medical care: bus, taxi, train, or plane fares to appointments, ambulance service, and mileage for driving to treatment
- Specialized treatments: acupuncture, addiction treatment, fertility procedures, smoking cessation programs
- Home modifications for medical needs: entrance ramps, widened doorways, or bathroom modifications for a disability
Your employer’s plan document determines which of these categories your specific HRA covers. Some HRAs reimburse all IRS-eligible expenses, while others limit reimbursement to a narrower set, like copays, deductibles, and coinsurance only. The plan design is entirely up to your employer.
How Your Employer Sets Up the Plan
Your employer funds the HRA entirely. There are no employee contributions, and the money your employer puts in isn’t counted as taxable income to you. This makes the arrangement tax-advantaged for both sides: the employer deducts the reimbursements as a business expense, and you receive the money tax-free.
Traditional HRAs must generally be paired with a group health insurance plan. Your employer can’t just hand you an HRA without also offering health coverage. The employee receiving the HRA typically needs to be enrolled in a qualifying group health plan, and the HRA must allow employees to permanently opt out of future reimbursements at least once a year. There are exceptions for specific HRA types, like the Individual Coverage HRA (ICHRA), which lets employers fund an HRA that employees use to buy their own individual health insurance, and the Qualified Small Employer HRA (QSEHRA), designed for businesses with fewer than 50 employees that don’t offer group coverage.
Your employer also decides how much to contribute annually. There’s no IRS-imposed maximum for traditional HRAs, though specific HRA types have caps. QSEHRA limits for 2026, for example, are $6,450 for self-only coverage and $13,100 for family coverage.
What Happens to Unused Funds
This is where HRAs differ significantly from HSAs. Your employer has full discretion over what happens to money you don’t spend. They can allow the full balance to roll over to the next year, permit a partial rollover up to a set amount, or require that unused funds are forfeited entirely at year’s end. Your plan documents will spell out which approach your employer chose.
If you leave your job, unused HRA funds are forfeited back to your employer in most cases. You can’t cash out the balance or transfer it to a personal account. The one exception: if you’re eligible for COBRA continuation coverage, you may be able to keep using your remaining HRA balance to pay for eligible expenses during that COBRA period. But once COBRA ends or you decline it, the funds revert to your employer.
HRA Compatibility With an HSA
If you’re enrolled in a high-deductible health plan and want to contribute to an HSA, a standard HRA will generally disqualify you. The IRS considers a traditional HRA to be “other health coverage” that conflicts with HSA eligibility because it can reimburse expenses before you meet your deductible.
There are workarounds, though. You can pair an HSA with a limited-purpose HRA, which only reimburses dental, vision, and preventive care expenses. A post-deductible HRA also works: it doesn’t reimburse anything until you’ve met the minimum annual deductible for a high-deductible plan, so it doesn’t undermine the HSA structure. A third option is a suspended HRA, where you elect before the plan year begins to pause all HRA reimbursements (except preventive care) for the year, preserving your HSA eligibility. When you end the suspension, you lose the ability to contribute to your HSA going forward.
How HRAs Differ From HSAs and FSAs
The three main tax-advantaged health accounts overlap in purpose but differ in ownership and flexibility. An HRA is funded solely by your employer, and the employer retains ownership of the funds. You can’t take the money with you when you leave. An HSA, by contrast, is your personal account: you own the funds, you can invest them, and they stay with you regardless of employment. An FSA is typically funded through your own pre-tax payroll deductions (though employers can contribute), and most FSA balances follow a use-it-or-lose-it rule at year’s end with only a small grace period or carryover allowed.
Because the employer controls the HRA, you have less flexibility but also no financial risk. You’re not putting your own money on the line. If your employer offers a generous HRA alongside good group coverage, it can substantially reduce your out-of-pocket healthcare costs without requiring you to set aside any of your own paycheck.