New look. Same Alegeus you trust.

What is an HRA?

A health reimbursement arrangement (HRA) helps consumers pay for eligible out-of-pocket healthcare costs. Learn about how it works, the best uses for it, and more.

 Jun 06, 2024

In this Article

Share this Article

A health reimbursement arrangement (HRA) is a great way to cover out-of-pocket healthcare costs with employer-contributed funds. If your employer offers an HRA, they’ll set aside money just for you to use on eligible medical expenses that aren’t covered by your insurance — helping you save money while taking care of your health.

How does an HRA work?

If your employer offers an HRA as part of your health benefits, you’ll be enrolled in it alongside your group health plan. Your employer decides:

  • How much they’ll contribute to your HRA for the year
  • When funds become available — all at once, in increments, or after you meet your plan’s deductible
  • What expenses the HRA can cover — usually things like deductibles, co-insurance, and prescriptions

If your employer allows it, unused HRA funds may roll over to the next year. But if you leave your company, any unused funds typically go back to your employer.

What are the benefits of an HRA?

With healthcare costs on the rise, an HRA can help you save money by using employer-provided, pre-tax dollars to cover medical expenses. This means you’re not paying out of pocket for certain healthcare costs, making it easier to manage and predict your medical spending each year.

What can you use an HRA for?

Your employer — along with IRS guidelines — determines what you can use your HRA funds for. Typically, this includes:

  • Doctor’s visits and medical treatments
  • Lab tests and diagnostic procedures
  • Prescription medications
  • Deductibles and co-insurance

Some HRAs are set up to automatically pay for qualified expenses, while others provide a debit card for easy use. Check with your employer to see how your HRA is structured.

HRA vs. HSA

HRA HSA
Your employer owns the account. You own the account.
Your employer funds the account. You fund the account (sometimes with assistance from your employer, known as employer seeding).
Your employer determines when funds become available. Funds become available as soon as you or your employer contribute them. Most often, accounts are funded with pre-tax withholdings from your paycheck.
Your employer determines what funds can be used for, which typically includes eligible out-of-pocket medical expenses not covered by insurance. You can use funds on any eligible out-of-pocket medical expenses not covered by insurance.
Your employer receives any unused funds at the end of the year (if no rollover policy is in place) or when you leave the company. You own your HSA funds for life. These funds can build up over time for long-term healthcare savings and for use in retirement. You can withdraw funds at any time without penalty, as long as they are used on eligible items.

A smart way to manage healthcare costs

An HRA is a great benefit that helps you reduce out-of-pocket expenses while ensuring you get the care you need. If your employer offers one, be sure to take advantage of it — it’s essentially free money to help you stay healthy!