Health reimbursement accounts (HRA) are part of a program set up by the Internal Revenue Service (IRS). It is designed so that an employer can reimburse an employee for certain medical expenses. This helps defray the cost of medical expenses. It also helps the employer save money on taxes. Like a health savings account, funds in health reimbursement accounts can roll over from year to year. The employer decides the amount that rolls over. Unlike a health savings account, only employers can contribute funds to a health reimbursement accounts. The funds cannot come out of an employee's salary, voluntarily or involuntarily. There is no limit on the amount of funds an employer can put into an HRA.
Since the IRS sets up this program, employees need to turn in receipts with itemized descriptions of what they paid for. These receipts are for record keeping purposes. The IRS will not allow tax deductions if the purchases were not qualified medical purchases. Qualified medical purchases must be outlined to the employee before a health reimbursement account is opened. This usually comes in the form of a plan. The employer sets up the plan. The employer decides what he will and will not reimburse the employee for. The reimbursement plan can be very flexible, and cover nearly everything. It can also be limited and cover only co-pays or premiums. This is up to the employer.
There are advantages and disadvantages to health reimbursement accounts. The advantages for the employer include knowing how much of their money is going to be tax-deductible. The advantages for the employee include a bit of potential relief in regards to medical expenses. Disadvantages include possible vague dialogue or stipulations in the coverage plan. It is important to ask if a procedure is covered before going to get it done. Many people have made the mistake of getting something done, such as a lab test, only to find out later that it is not covered by their health reimbursement accounts.
You do not have to have health insurance in order to participate in a health reimbursement account. Some employers may even reimburse you the cost of your health insurance coverage from your HRA. Health reimbursement accounts can also be used in conjunction with health savings accounts and flexible spending accounts. If you are self-employed, you cannot have a health reimbursement account. If your salary is high, you may have one, but your coverage may be limited. If you need assistance in locating particular coverages at a pre-determined price, we can help save 50% on health insurance.