My Employer Offered Me an HRA, Now What?

Many employers are offering a health reimbursement arrangement (HRA) because it provides a flexible way for employers to offer health insurance reimbursements to their employees. Employees have access to an employer-sponsored fund to help pay for qualified expenses such as insurance premiums and out-of-pocket medical costs. It operates as a supplemental benefit to an individually secured health insurance plan.

During your employer’s open enrollment period or qualifying life event, employees can opt-in to benefit from an HRA. Varying coverage, company-specific claims processes, and lack of communication can make it hard for employees to capitalize on the funds available to them.

Consider the following to maximize what you get out of your HRA.

Determine Which Expenses You are Covered for

Not every HRA covers the same expenses, and employers may have differing guidelines for what is considered reimbursable or not. It’s always best to check with your employer directly regarding if specific allowances will be covered under by an HRA. Different coverage combinations include:

• Insurance premiums only
• Insurance premiums + Qualified Medical Expenses
• Qualified Medical Expenses only

All expenses that can be reimbursed are listed in IRS Publication 502, but employers can select only certain qualifications. Ensure that you are aware of what your employee does and does not cover before paying out of pocket.

Employee-established rules also determine if unused reimbursement funds are rolled over year after year. Determining when the funds can be used and what for will help you maximize your savings on medical expenses.

Understand the Claims Process from Start to Finish

Before putting down any of your own money on medical coverage, ensure you are aware of the steps needed to receive a reimbursement.

1. Employees purchase health care out of pocket – Employees pick the coverage or medical service they require and are covered by their HRAs. Up-front costs are paid for by employees.

2. Employees submit reimbursement requests – Most employers accept documentation from a provider or an explanation of benefits from the health insurance company as proof. Details regarding the services provided, cost, and date provided must be included in this documentation.

3. Company reviews the reimbursement requests – Either an internal or external review process determines if the submitted request is eligible for reimbursement. Review your company’s policy to determine the timeline provided for the review process.

4. Employees receive a tax-free reimbursement – Approved reimbursements are tax-free and get credited directly to the employee.

Different companies have various ways to file for reimbursement, so review your policy to ensure you follow the correct step and have the right documentation.

Reach Out to Understand How Your Company Handles Specific Aspects

The flexibility of an HRA allows for companies to make personalized decision regarding the coverage and how they will communicate with employees. Claims and reimbursement can be handled internally or outsourced to a third-party benefits coordinator.

Common company-specific processes include setting up a dashboard for employees and those responsible for managing the HRA accounts to track reimbursement requests. Inquire with your company’s human resources department or benefits contact for details and important timelines regarding enrolling in benefits and receiving compensation.

Businesses are quickly recognizing the flexibility and convenience of offering an HRA platform. The days of a one-size-fits-all company plan that doesn’t really meet the needs of the employees are fading fast. Companies considering setting up your HRA, contact us to help you get started. We can guide you through the HRA setup process as well as chaperone employees through the Marketplace health insurance enrollment steps.