Health reimbursement accounts | what they are + how they work

A health reimbursement account is an employer-funded health benefit plan that employees use to access healthcare. They are reimbursed for any out-of-pocket expenses and can sometimes be used to pay for plan premiums. Employer reimbursement for health insurance premiums can be paid out in a number of ways, depending on business size and the type and other factors. Health insurance reimbursement plans allow employers to offer insurance to their employees, even if they don’t know much about insurance, to begin with. In most cases, this system makes it easier for everyone involved.

When considering reimbursement accounts, it’s important to understand HRA vs. HSA. Health reimbursement accounts (HRAs) are funded by employers. Health savings accounts (HSAs), on the other hand, are owned by employees and can receive contributions from both employees and employers based on certain amounts set by the IRS.

A common question is “can I withdraw money from my HRA account?” Employees cannot withdraw from their accounts, but very often, unused funds can be applied to future healthcare expenses, typically within the same calendar year. Becoming familiar with HRA rules for employees—especially ICHRA and QSEHRA, the Qualified Small Employer Health Reimbursement Arrangement—is critical for those offering HRAs. This can help ensure you provide the right tools and information to your employees.

Take Command’s platform helps employers create quality health plans for employees. The software will walk you through the entire process of designing custom HRAs, including start date selection and budget determination. The platform also helps users introduce their teams to plans, handle paperwork, and ensure adequate communication between all parties. Finally, each month, the platform helps users reimburse their employees. This can be an excellent option for those that are new to HRAs and want a trusted partner by their side as they develop and distribute uniquely-tailored HRAs to their employees.

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Health Reimbursement Accounts vs. HSA

HRAs should not be confused with HSAs. Knowing the difference between a health reimbursement account vs HSA can put you in a better position to offer the best insurance plans to your employees. But can I have an HRA and HSA, and is HRA or HSA better for pregnancy? What about a major surgery? Considering that the two are completely separate accounts, you can have both HRA and HSA plans at once.

You might also browse an “HRA for Dummies” guide to learn more about health reimbursement accounts and to understand the pros and cons of HRA vs. HSA. An HRA vs. HSA for a single person might look drastically different from plans for married couples, depending on your employer and business rules, so it’s essential to read the fine print. You should also understand HRA vs HSA vs FSA, as these all refer to different things and play different roles in the health insurance landscape.

Health Reimbursement Account Rules

Becoming familiar with health reimbursement arrangement rules is critical for anyone working with HRAs. For example, you should research HRA-eligible expenses 2022. These currently include things like prescription drugs and visits to the doctor, but you should check with your specific plan to see what is included.

You should also become familiar with HRA rules for employees and IRS rules for health insurance reimbursement, especially considering that these are constantly changing. Doing your research ahead of time can lead to improved outcomes down the road—for you and your employees. Since HRAs aren’t actually accounts per se, so there is no pre-funding involved. For that reason, employers only have to pay when a reimbursement is claimed.

But what happens to unused HRA funds? Generally, HRA funds that aren’t used in a given year roll over into the next year at the discretion of the employer. While employees can’t withdraw these funds as cash, they can use them to pay for whatever medical expenses come up in the future within a calendar year or at the discretion of the employer. As always, it’s important to understand your specific plan and communicate requirements to employees. Getting started with an HRA can be tricky, especially for employees that haven’t used this type of insurance before, so it’s crucial that employers provide them with the tools and resources they need to take advantage of all the options at their disposal.

How to Use HRA Money

Learning how to use HRA money most effectively is critical to providing your employees with the healthcare they need. If you’re looking for ideas on how to use up HRA funds, it can be helpful to consult with a guide or related resources for more information. For example, HRAs can cover mental health treatment. HRAs can also cover vision-related expenses. You can also use HRAs for over-the-counter medications.

The bottom line is that there are many different things that may be covered by HRAs, and researching HRA IRS-eligible expenses can give you a better idea of what these are. As an employer, you have a good amount of freedom in terms of what you provide employees, but there are some basic requirements that must be covered under all plans—namely, that plans must be funded entirely by the employer and not taken out as a deduction from salary. Funds must also be used to cover healthcare-related expenses only. Some HRAs – like ICHRA and QSEHRA – even reimburse for health insurance premiums.

Health Reimbursement Account & The IRS

Health reimbursement account IRS rules require that HRA plans be used to cover medical expenses and not withdrawn for other purposes. A guide to “IRS flexible spending account eligible expenses 2021” or “IRS HRA eligible expenses 2021” can give you an idea of some of the current expenses that are allowed under HRAs. For a more recent list of expenses, you can look at IRS HRA eligible expenses 2022. IRS Publication 502 goes over the itemized deduction for the expenses that can be claimed on Schedule A. IRS Publication 969 goes into more depth about HRAs, HSAs, and related healthcare plans.

Understanding the IRS rules for health insurance reimbursement is key to providing your employees with valuable healthcare resources while remaining compliant with standard rules and guidelines. When structuring your healthcare reimbursement plan, it can be helpful to work with a platform like Take Command, which can guide you through the entire process. This can help ensure that you meet all requirements and deliver high-quality insurance to your employees. While HRAs can be incredibly valuable to employees, you should understand the ins and outs of your plan in order to effectively communicate these details to your employees. By keeping everyone on the same page, you can more easily provide employees with what they need.

Health Reimbursement Account vs. FSA

Understanding a health reimbursement account vs FSA is important when considering healthcare plans. A flexible spending account (FSA), like an HSA, is owned by employees and covers a broader range of expenses, including those for dependents. FSA/HRA eligible items vary between organizations, and so when considering HRA vs FSA eligible expenses, employees should check with their companies to see what specifically is included in their plans. This is especially important if you plan on using HRA and FSA together.

Health Reimbursement Account Rollover

Health reimbursement account rollover funds can be used later on. In some cases, however, there are certain limits for the amount that can be carried over to subsequent months. You should also become familiar with health reimbursement arrangement rules and how to handle health reimbursement account taxes. Doing your research ahead of time can help ensure a smooth implementation process for employers. It can also help reduce confusion for employees.

Searching IRS HRA eligible expenses 2021 can bring up a list of helpful resources on which expenses are currently eligible. You should also be sure to check IRS rules for health insurance reimbursement, especially if you are new to offering this type of insurance. Doing your research ahead of time can help simplify the process of implementing new plans. It can also help inform employees of their options, allowing them to decide what they do and don’t require as part of their healthcare coverage. There’s no doubt about it—getting started with HRAs can be tricky, but by learning to leverage the tools and plans that are available to you, you can increase employee satisfaction and ensure that they get the coverage they need.