Understanding Health Reimbursement Accounts

 health reimbursement account is an employer-funded group health plan that small business owners can link to the health plans they offer their employees. Think of it as a health spending account that employees use to pay for their share of qualified health care costs. 

Standard HRA Plan Designs
You can have multiple plans in place to allow for maximum flexibility. Because of this flexibility, you can design the plan to meet the unique needs of your company and the employees. Some eligible expenses include doctor visits, hospitalizations, and prescription drugs. Standard plan designs include the following:

• Deductibles only
• Specified expenses only
• All uninsured medical expenses
• Deductible, co-pay, and coinsurance

Because you contribute funds to employees' HRAs on a pre-tax basis, the funds are not taxable to the employee. That also means that employees cannot claim a tax deduction for an expense reimbursed by their HRA. Also, HRA funds cannot offset health insurance premiums.

Accessing Funds in a HRA
The tax-free funds you allocate to a health reimbursement account may be rolled over for use in following years, and there is no limit to the amount of money an employer can contribute. Employers decide how employees access funds in HRAs, but the three most commonly preferred methods are:

1. Debit card to pay for expenses at the time of billing
2. Employees pay up front for expenses and get reimbursed later
3. Doctors bill the insurance company and funds are deducted from the HRA

As the employer, you fund and own your employees’ HSAs, and can decide whether they can access unused dollars for qualified medical expenses after they leave the company. 

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Sackett Health Insurance covers your health insurance needs throughout Sonoma County. For more information on the benefits of a health reimbursement account, contact us today. Like us on Facebook, find us on Google+, and subscribe to our blog.​