Home ›
Learn › Health Reimbursement Arrangement (HRA)
Health Insurance
What Is a Health Reimbursement Arrangement (HRA)? Employer Plans Explained
By the PolicyZen Team · Updated March 2026 · 8 min read
An HRA is employer-funded money you can use tax-free to pay for qualified medical expenses. Unlike an FSA or HSA, you don't contribute to an HRA — your employer does, entirely. You submit receipts and get reimbursed. The money is tax-free to you, and it reduces your employer's payroll tax burden too.
HRAs are employer-owned accounts — you cannot take them with you when you leave. Unused balances may or may not roll over depending on your employer's plan design. The IRS defines what counts as a qualified medical expense, but your employer determines how much you get and which expenses are reimbursable.
The Four Main Types of HRAs
- Integrated HRA (traditional): Used alongside employer-sponsored group health insurance. Employer puts money in your HRA to help cover cost-sharing (deductibles, copays, coinsurance). You must be enrolled in the group health plan to use it. Most common type.
- ICHRA (Individual Coverage HRA): Employer funds an HRA you use to buy your own individual health insurance on the marketplace. Any size employer can offer it. Employees choose their own plan; employer reimburses premiums and often other expenses. Premium subsidy eligibility is affected — if ICHRA is "affordable," you cannot use an ACA premium tax credit instead.
- QSEHRA (Qualified Small Employer HRA): For employers with fewer than 50 employees who don't offer group health insurance. Employees buy individual coverage; employer reimburses up to $6,350 (individual) / $12,800 (family) in 2026. Similar ACA interaction as ICHRA.
- Excepted Benefit HRA: Limited to $2,100/year, used alongside major medical insurance for dental, vision, and other "excepted benefits." Doesn't affect ACA subsidy eligibility.
HRA vs. HSA vs. FSA
- HRA: Employer funded only. You don't contribute. Employer owns it — balance may be forfeited on termination.
- HSA: You and/or employer contribute. You own it — portable, rolls over forever, invested like a 401(k). Requires HDHP enrollment.
- FSA: Employee (and sometimes employer) contributes. Use-it-or-lose-it (with limited grace period/rollover). Not portable on job change.
ICHRA affordability affects your ACA subsidy eligibility. If your employer offers an ICHRA that the IRS deems "affordable" (your out-of-pocket premium for the benchmark plan after ICHRA reimbursement is less than 9.02% of household income in 2026), you cannot claim an ACA premium tax credit on the marketplace. If you'd save more from the tax credit, you can opt out of the ICHRA — but you lose the employer money.
What HRA Funds Can Be Used For
IRS Publication 502 defines qualified medical expenses — the same list applies to HSAs and FSAs. Common eligible expenses: deductibles, copays, coinsurance, prescription drugs, dental care, vision care, mental health treatment, medical equipment, and (for most HRA types) health insurance premiums.
Always save your receipts. If the IRS audits your employer, HRA reimbursements without substantiation become taxable income to you.
Frequently Asked Questions
What is a Health Reimbursement Arrangement (HRA)?
An HRA is an employer-funded account that reimburses employees for eligible medical expenses and, in some cases, health insurance premiums. Unlike FSAs and HSAs, only the employer contributes to an HRA — employees cannot make their own contributions. HRA funds are generally tax-free to the employee when used for qualified expenses.
What are the main types of HRAs?
The four main HRA types are: (1) Traditional HRA — paired with an employer-sponsored health plan; (2) Qualified Small Employer HRA (QSEHRA) — for employers with fewer than 50 employees; (3) Individual Coverage HRA (ICHRA) — allows employees to buy their own insurance with employer funds; and (4) Excepted Benefit HRA — for limited benefits like dental and vision.
What can HRA funds be used for?
Eligible HRA expenses include medical, dental, and vision costs such as doctor visits, prescriptions, lab tests, and dental care. ICHRA funds can also reimburse health insurance premiums. The specific list of eligible expenses varies by HRA type and employer plan design — always check your plan documents.
How is an HRA different from an HSA or FSA?
HRAs are employer-funded only (employees cannot contribute), and any unused balance may or may not roll over depending on employer design. HSAs are individually owned, portable, and roll over indefinitely. FSAs are employee-elected with annual use-it-or-lose-it rules. HRAs also do not require a high-deductible health plan, unlike HSAs.
Do unused HRA funds roll over?
It depends on the employer's plan design. Employers choose whether to allow rollover of unused HRA balances to the next plan year. Some employers permit full rollover, others allow partial rollover, and some apply use-it-or-lose-it rules similar to FSAs. Check your specific HRA plan documents for the rollover policy.
Understand Your Employer Benefits
Upload your HRA plan documents to PolicyZen. Ask what expenses are reimbursable, how much you have left, and whether opting out makes financial sense.
Analyze My Benefits →
PolicyZen