Health reimbursement agreements (HRAs) are becoming an increasingly popular option for employers who want to provide their employees with health benefits while also keeping costs under control. However, there is still some confusion about how HRAs work and what they can offer. In this article, we will examine the different statements about HRAs and determine which ones are accurate.

Statement #1: An HRA is a type of health insurance.

This statement is not entirely accurate. While an HRA is related to healthcare, it is not a type of health insurance. Instead, it is a type of benefit plan that allows employers to reimburse their employees for qualified medical expenses. The funds for an HRA come from the employer, and they are used to cover expenses such as deductibles, copayments, and coinsurance.

Statement #2: HRAs are only available to large employers.

This statement is not correct. While it is true that some large employers offer HRAs as part of their benefits package, small employers can also offer HRAs. In fact, the IRS recently created a new type of HRA specifically for small employers called the Individual Coverage HRA (ICHRA). This type of HRA allows small employers to provide their employees with reimbursement for individual health insurance premiums.

Statement #3: An employee must have employer-provided health insurance to participate in an HRA.

This statement is not true. An employee does not need to have employer-provided health insurance to participate in an HRA. However, if an employee does have employer-provided health insurance, any reimbursement from the HRA must be used to pay for out-of-pocket expenses associated with that health insurance plan.

Statement #4: Unused funds in an HRA are forfeited at the end of the year.

This statement depends on the type of HRA. With a traditional HRA, any unused funds at the end of the year are forfeited. However, with a newer type of HRA called a Qualified Small Employer HRA (QSEHRA), any unused funds can roll over to the next year. Employees can also cash out any remaining funds if they leave their job.

Statement #5: HRAs can be used to pay for any medical expense.

This statement is not accurate. HRAs can only be used to reimburse employees for qualified medical expenses as defined by the IRS. These expenses can include deductibles, copayments, coinsurance, and other out-of-pocket costs. However, HRAs cannot be used to pay for insurance premiums or non-medical expenses.

In conclusion, while health reimbursement agreements are a valuable benefit option for many employees, there are still some misconceptions about how they work. The correct statement about HRAs is that they are a type of benefit plan that allows employers to reimburse employees for qualified medical expenses. HRAs are available to both large and small employers, and employees do not need to have employer-provided health insurance to participate. Unused funds in an HRA may or may not be forfeited at the end of the year, depending on the type of HRA, and HRAs can only be used to reimburse for qualified medical expenses.