A health reimbursement arrangement (HRA) is a plan offered by an employer in which the employer promises to reimburse employer-defined, eligible, out-of-pocket medical expenses incurred by the employee or their dependents.
HRAs come in many shapes and sizes. Most employers use an HRA to offset the cost of a higher deductible to the employee. Some employers use HRAs as a stand-alone dental, vision or retiree plan. If an HRA is designed to cover medical expenses, it must be integrated with an eligible major-medical plan. When using an HRA to cover medical expenses and offset a higher deductible, many employers offer both an HRA and a flexible spending account (FSA). The FSA allows the employee to still save tax dollars on out-of-pocket medical expenses not covered by either the medical plan or HRA.