A Health Reimbursement Arrangement, or HRA, is an employer-funded account that pays you back, tax-free, for qualifying medical expenses and — depending on the plan type — for health insurance premiums. Only your employer can put money in; you cannot contribute from your paycheck. The reimbursements do not count as taxable income, and the employer gets to deduct the contributions as a business expense. That basic structure is the same across every HRA, but several distinct HRA types exist under federal rules, and the one your employer chose determines what you can spend the money on and how much is available.
How the Money and the Tax Break Work
Every dollar in an HRA comes from your employer. IRS rules prohibit salary-reduction contributions or any other employee funding, which is what sets an HRA apart from a Health Savings Account or a Flexible Spending Account.
The tax treatment runs in both directions. Employer contributions are excluded from your gross income, so you do not owe income tax on the money going into the account.1Office of the Law Revision Counsel. 26 USC 106 – Contributions by Employer to Accident and Health Plans The reimbursements you receive are also excluded from gross income, as long as you spend the money on qualifying medical care.2Office of the Law Revision Counsel. 26 USC 105 – Amounts Received Under Accident and Health Plans
The employer owns the account. If you leave the job or are terminated, whatever is left in the HRA generally stays behind rather than following you. If the plan is subject to COBRA, you may have a limited right to keep using your existing balance after separation.
Unused funds can roll over from one plan year to the next, which is a real advantage over a health FSA.3HealthCare.gov. Health Reimbursement Arrangements (HRAs) – 3 Things to Know Whether that actually happens in your case depends on the plan design. Some employers allow the full balance to carry over, some cap the rollover amount, and some reset the account each year. Your Summary Plan Description spells out the rule that applies to you.
The Main Types of HRAs
Federal rules authorize several HRA types, each aimed at a different coverage situation. The one you have determines the contribution limit, the coverage you need to keep it, and whether premiums are reimbursable.
Individual Coverage HRA (ICHRA)
An ICHRA is offered by employers of any size to reimburse workers for premiums on individual health insurance — including Marketplace plans, private policies, and Medicare Part A and B or Part C — along with other qualifying medical costs. You must actually be enrolled in qualifying individual coverage to draw on the funds. Short-term plans and stand-alone dental or vision policies do not count.4HealthCare.gov. Individual Coverage Health Reimbursement Arrangements (HRAs) There is no federal cap on the employer’s annual contribution.
Qualified Small Employer HRA (QSEHRA)
Created by the 21st Century Cures Act, the QSEHRA is available only to employers with fewer than 50 full-time employees that do not offer a group health plan.5Internal Revenue Service. Affordable Care Act Tax Provisions for Employers It has annual contribution caps that the IRS adjusts each year. For 2026, the maximum reimbursement is $6,450 for self-only coverage and $13,100 for family coverage.6Internal Revenue Service. 2026 Publication 15-B To receive reimbursements, you must maintain minimum essential coverage.7HealthCare.gov. Health Reimbursement Arrangements (HRAs) for Small Employers
Group Coverage HRA
A traditional group coverage HRA works alongside an employer-sponsored group health plan. The employer provides the insurance, and the HRA is a supplemental fund you can use for deductibles, copays, and other out-of-pocket costs. These are common at larger organizations paired with high-deductible health plans. There is no federal cap on employer contributions.
Excepted Benefit HRA (EBHRA)
An EBHRA is offered by employers that also sponsor a group health plan, but you do not have to enroll in the group plan to use the EBHRA. It is limited to a narrower set of expenses: dental care, vision care, COBRA premiums, short-term insurance, and cost-sharing amounts like copays and deductibles. For plan years beginning in 2026, the maximum an employer can make newly available is $2,200.8Internal Revenue Service. Rev. Proc. 2025-19
What You Can Get Reimbursed For
What qualifies is governed by the Internal Revenue Code’s definition of medical care, which covers amounts paid to diagnose, treat, or prevent disease, along with costs that affect the structure or function of the body.9Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses In practice, that includes:
- Doctor and hospital costs: office visit copays, lab work, surgery, X-rays, and emergency room fees
- Prescription drugs and insulin
- Over-the-counter medications and menstrual care products, reimbursable without a prescription since 2020 under CARES Act changes10Internal Revenue Service. IRS Outlines Changes to Health Care Spending Available Under CARES Act
- Medical equipment such as crutches, blood sugar monitors, and bandages
- Mental health services, including therapy, counseling, and psychiatric care
- Dental and vision care, if your specific plan includes them
Under an ICHRA, the list expands to include the monthly premiums you pay for individual health insurance or Medicare. IRS Publication 502 catalogs qualifying and non-qualifying expenses in detail if you want to check a specific item before submitting a claim.
How an HRA Interacts With an HSA or FSA
If your employer offers more than one tax-advantaged health account, the interaction matters. A general-purpose HRA — one that reimburses any qualifying medical expense from the first dollar — generally disqualifies you from contributing to a Health Savings Account, even if you are enrolled in a high-deductible health plan.11Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans Three HRA structures preserve HSA eligibility: a limited-purpose HRA that covers only dental, vision, and preventive care; a post-deductible HRA that does not pay anything until you have met the high-deductible plan’s minimum annual deductible; and a suspended HRA that is paused before the coverage period so it does not reimburse general medical expenses. Ask your benefits administrator which structure applies before making HSA contributions.
When you have both an HRA and a health FSA, the plan documents specify which pays first. The default order pays out of the HRA until it is exhausted, then from the FSA. Some employers flip that order so you use FSA dollars before losing them at year-end. Your Summary Plan Description will say which order applies.
How to File a Claim
An HRA works as a reimbursement: you pay the expense first, then submit proof to get paid back. Most employers use an online benefits portal, though some still route claims through a third-party administrator on paper.
You will generally need:
- An itemized receipt or billing statement showing the provider name, date of service, description of the service, and amount paid
- An Explanation of Benefits from your insurance carrier showing what was covered and what you owe
- For a QSEHRA or ICHRA, proof that you are enrolled in minimum essential coverage or individual health insurance
Your Summary Plan Description explains exactly which forms and fields the administrator requires, including provider Tax Identification Numbers and procedure codes. Gathering documents before you submit prevents back-and-forth with the administrator. Once the claim is approved, reimbursement typically arrives by direct deposit or as a non-taxable line on your paycheck.
If Your Claim Is Denied
Federal law protects your right to challenge a denial. Under ERISA, the plan must give you written notice explaining the specific reasons for the denial and a reasonable opportunity for a full and fair review.12Office of the Law Revision Counsel. 29 USC 1133 – Claims Procedure Department of Labor regulations require at least 180 days from the date of the denial to file your appeal.13U.S. Department of Labor. Benefit Claims Procedure Regulation FAQs Read the denial letter carefully. Common reasons include missing documentation, an expense that falls outside the plan’s covered categories, or a duplicate submission, and resubmitting with the correct paperwork often clears the issue without a formal appeal. If you do appeal, the plan fiduciary has to conduct a new review and give you a written decision.