A health care reimbursement account, formally called a Health Reimbursement Arrangement (HRA), is an employer-funded account that reimburses you tax-free for qualifying medical expenses. Unlike other health accounts you may have heard of, only your employer puts money into an HRA. You don’t contribute to it yourself, and you don’t own the funds if you leave your job.
How an HRA Works
Your employer sets up the HRA and decides how much money to allocate to it each year. When you pay for an eligible medical expense out of pocket, you submit a claim with documentation (typically a receipt or explanation of benefits from your insurer), and the HRA reimburses you. The money you receive is not taxed as income, and your employer gets to deduct the contributions as a business expense. Both sides benefit from the tax treatment.
There’s no actual bank account with your name on it holding a balance. The HRA is more of a promise from your employer to reimburse you up to a set amount. Some employers use a debit card linked to the arrangement so reimbursement feels instant, but the underlying structure is the same: your employer pays, you get reimbursed, and neither of you owes taxes on the money.
Types of HRAs
Not all HRAs work the same way. The type your employer offers determines what expenses are covered, how much is available, and whether you need other insurance alongside it.
Individual Coverage HRA (ICHRA)
This version lets employers reimburse you for premiums on an individual health insurance plan you choose yourself, plus out-of-pocket costs like copays and deductibles. There’s no cap on how much an employer can contribute annually. It’s designed as an alternative to traditional group health plans, giving both you and your employer more flexibility. You pick the plan that fits your needs; your employer helps pay for it.
Qualified Small Employer HRA (QSEHRA)
Small employers (fewer than 50 full-time employees) that don’t offer a group health plan can use this version instead. It comes with annual contribution limits set by the IRS. In 2023, those limits were $5,850 for individual coverage and $11,800 for family coverage, and they adjust upward each year for inflation. Your employer decides the actual amount within those caps.
Excepted Benefit HRA
This is a supplemental HRA that works alongside a traditional group health plan. It covers expenses your primary insurance doesn’t, like vision care, dental work, copays, and coinsurance. It cannot be used to reimburse premiums for individual health insurance or your group plan. The annual limit for 2026 is $2,200.
What Expenses Qualify
HRAs can reimburse a wide range of medical costs defined under IRS rules. The list is broader than most people expect. Beyond the obvious categories like doctor visits, hospital stays, prescriptions, and dental treatment, qualifying expenses include acupuncture, chiropractic care, fertility treatments, hearing aids, eyeglasses, contact lenses, vision correction surgery, mental health care (psychiatry, psychology, therapy), and even smoking cessation programs.
Less obvious eligible expenses include breast pumps and lactation supplies, guide dogs and service animals, lead paint removal from your home if a child has lead poisoning, medical transportation costs, and weight-loss programs when prescribed for a specific condition. Bandages, crutches, wheelchairs, and prosthetics all qualify too. The IRS publishes a detailed list in Publication 502, but the general rule is that if it’s a legitimate medical expense and not purely cosmetic, it likely qualifies.
Depending on the type of HRA, health insurance premiums may also be reimbursable. Individual coverage HRAs can reimburse premiums for the individual plan you select. Excepted benefit HRAs cannot reimburse most insurance premiums.
How HRAs Differ From HSAs and FSAs
These three account types are easy to confuse because they all help pay for medical expenses with tax advantages. The differences matter, especially when it comes to who controls the money.
- Who funds it: An HRA is funded entirely by your employer. An HSA (Health Savings Account) can receive contributions from you, your employer, or anyone else. An FSA (Flexible Spending Account) is mainly funded by you through payroll deductions, though your employer can contribute too.
- Who owns it: You own an HSA. It’s yours permanently, like a bank account. Your employer owns the HRA and the FSA. If you leave your job, unused HRA and FSA funds generally stay behind.
- Portability: An HSA travels with you when you change jobs. An HRA and FSA do not. Losing your job means losing access to those funds (with limited exceptions like COBRA continuation).
- Rollover rules: HSA balances roll over indefinitely, year after year. FSA funds mostly expire at the end of the plan year, though some plans allow a small carryover or a short grace period. HRA rollover depends on your employer’s plan design; some allow partial or full rollover, others don’t.
- Insurance requirement: An HSA requires enrollment in a high-deductible health plan. HRAs and FSAs don’t have this requirement, though specific HRA types have their own rules about accompanying coverage.
You can’t contribute to both an HSA and a traditional FSA in the same year, but having an HRA doesn’t necessarily block you from an HSA, depending on the HRA type and what it covers.
Why Employers Offer HRAs
From an employer’s perspective, HRAs provide cost predictability. Instead of committing to the unpredictable premiums of a group health plan that might spike year over year, an employer sets a fixed dollar amount it’s willing to spend per employee. This is sometimes called a “defined contribution” approach to health benefits, as opposed to the “defined benefit” model of picking and paying for a specific insurance plan.
HRAs are especially attractive to small businesses that can’t negotiate favorable group rates. A small employer can offer a QSEHRA, let each employee choose their own individual market plan, and reimburse a portion of the cost. The employer controls spending, and employees get to pick coverage that fits their personal situation rather than being locked into a one-size-fits-all group plan. Employer contributions remain tax-deductible, so the financial incentive aligns on both sides.
How to File a Claim
The IRS requires that every expense submitted for reimbursement be substantiated. In practice, this means you’ll need to provide documentation for each claim: a receipt from the provider, an itemized bill, or an explanation of benefits statement from your insurance company. Most HRA administrators provide an online portal or mobile app where you upload these documents and track your remaining balance.
Some plans issue a debit card that draws directly from your HRA, which simplifies payment at the point of service. Even with a debit card, you may still need to submit backup documentation after the fact to confirm the expense was medically eligible. If you can’t substantiate a charge, the administrator can deny the reimbursement or require you to repay the amount.
Turnaround times vary by employer and administrator, but most claims are processed within a few business days to two weeks. Keep your receipts organized throughout the year, because expenses that aren’t properly documented won’t be reimbursed regardless of how much is available in your account.