Health Reimbursement Accounts, or HRAs, are a great tool that people can use to reimburse themselves for expenses related to dental and healthcare. However, not all expenses are eligible for reimbursement.
While the IRS has approved a complete list of eligible expenses for HRAs, individual employers can determine which expenses they want to qualify for their plan. The main reason is that HRAs, unlike HSAs or FSAs, are funded by the employer, so they have a significant say in how all aspects of that healthcare plan look.
Below is a complete guide to HRA-eligible expenses to help you determine how exactly you can use this tax-advantaged account.
What Is an HRA?
An HRA is an account designed specifically to pay for health-related expenses. The money put in these accounts is on a pre-tax basis which helps lower employee costs. In addition, employers fund HRA accounts, giving them more control over their design versus an HSA. Employers will typically create their HRA plans so their employees can save on medical costs and individual medical expenses for certain services.
Many employers will target eligible HRA expenses based on their healthcare plan’s coverage. For example, if the plan doesn’t offer prescription coverage, employers may make prescription costs eligible for HRAs.
While each HRA is unique, most will provide eligibility for expenses such as prescription and over-the-counter drugs, alternative medicine and specialists; vision and dental care; and expenses related to an employee meeting their health coverage’s deductible and co-insurance amounts.
How HRAs are Structured
HRAs are typically structured in two ways based on how the expenses are paid.
Under the first scenario, the HRA will pay first. Then, employees would be allowed to draw from their HRA funds as they incur health-related expenses. Finally, after all the funds in the HRA are depleted, employees would be responsible for covering their out-of-pocket expenses until they’ve met their plan’s deductible. Co-insurance limits would kick in after that.
The second scenario is the opposite of that. Employees pay first until they’ve spent an out-of-pocket amount preset by the plan. Once they reach this amount, the HRA will start paying until all the account funds are depleted. After, employees take over to pay for all out-of-pocket expenses until they’ve met the deductible, and then the co-insurance kicks in as above.
HRA Rate Tables
It’s also possible for employers to include what’s known as a rate table for the HRAs they offer employees. This is a set threshold that employees would need to meet before they can begin using funds from their HRA. But, again, it’s dependent on the type of healthcare insurance plan to which they’re subscribed.
For instance, single plans may require the insured to pay $1,500 in expenses out of their pockets before the HRA will start reimbursing any expenses. However, the same rate table could say that family plans require the insured to pay $2,500 before the HRA reimbursement.
Rate tables can also apply in terms of the tiers of expenses and how they are paid. For instance, the HRA may cover the entirety of the expense if it’s less than $700. However, the HRA might cover half of the expense if the expense is between $701 and $1,500. And if the expense is more than $1,500, the insured would be responsible for the total amount up to their deductible.
Other Things to Keep in Mind
Employers and employees should also know that different reimbursement structures can be set under an HRA. This could include fixed dollar payments, various reimbursement rates for out-of-network and in-network expenses, and a percentage of payments for expenses. These items and potentially more could affect how employees can reimburse themselves using their employer-funded HRA.
Employers should also include all HRA-eligible expenses in their healthcare plan documents. It should be laid out clearly so employees can easily refer to it and receive reimbursement correctly.
Finally, employers should always advise employees to keep detailed records of all expenses they pay using their HRA. The health insurance company may require the insured to prove that the payment they reimbursed themselves for was eligible under the plan’s details. This would happen if the health insurance company, employer, or employee were ever under an IRS audit.
Beckham Insurance Group Has You Covered
We hope you enjoyed this guide on HRA-eligible expenses! Remember, employees should keep detailed records of their receipts, medical diagnosis letters, physician diagnosis letters, prescriptions, and Explanation of Benefits (or EBOs). By having these records on hand and readily available, employees can avoid potential headaches from any reimbursed expense that comes into question.
If you are an employer searching for help in Georgia or South Carolina, reach out to a member of our team at Beckham Insurance Group. Located in Charleston, SC, and St. Simons, GA, we proudly offer complete access to all group health and supplemental insurance markets and products.
Creating a competitive—and compliant—benefits package that meets the needs of your business couldn’t be easier. To get started, contact us today for a free quote. We can’t wait to help you create a healthier and happier workplace!