What Is an HRA? Health Reimbursement Account Explained

Health Reimbursement Accounts — HRAs — are one of the more underutilized and misunderstood tools in the employer benefits toolkit. Unlike HSAs or FSAs, which employees fund themselves, HRAs are entirely employer-funded. If your employer offers one, understanding how it works could save you significant money — and knowing your rights when a reimbursement is denied is equally important.

What Is an HRA?

A Health Reimbursement Account (also called a Health Reimbursement Arrangement) is an employer-funded account that reimburses employees for qualified medical expenses. The employer sets aside a defined amount of money, and employees submit eligible expenses for tax-free reimbursement.

Key features:

• Funded entirely by the employer — employees do not contribute
• Reimbursements are tax-free to the employee
• Employer deducts contributions as a business expense
• Employer controls the rules — what expenses are eligible, rollover provisions, and amounts

HRAs are not subject to annual contribution limits the way HSAs are, though the employer sets their own internal limits.

The Three Main Types of HRAs

1. Traditional HRA (Integrated HRA) Paired with a group health plan, a traditional HRA reimburses employee cost-sharing — deductibles, copays, and coinsurance — under the group plan. Employers with existing group coverage often use this to reduce employees' out-of-pocket burden.

2. Individual Coverage HRA (ICHRA) Introduced in 2020, the ICHRA allows employers of any size to reimburse employees for individual health insurance premiums (purchased on or off the Marketplace) and qualified medical expenses. Employees choose their own plans; the employer reimburses up to a defined amount.

ICHRAs have no contribution limit set by the IRS — the employer decides the amount. However, there are age and family size variation rules (employers can vary amounts by these factors).

3. Qualified Small Employer HRA (QSEHRA) Designed for small employers with fewer than 50 full-time employees who don't offer group health insurance. The QSEHRA reimburses individual health insurance premiums and qualifying medical expenses.

For 2025, QSEHRA contribution limits:

• Self-only: $6,350 per year
• Family: $12,800 per year

Employees receiving QSEHRA reimbursements must report them when claiming ACA premium tax credits.

What Expenses Are Reimbursable?

Eligible expenses under most HRAs are defined by IRS Section 213(d), the same definition used for HSAs:

• Medical care costs (doctor visits, surgery, hospital care)
• Dental and vision expenses
• Prescription drugs
• Mental health treatment
• Certain over-the-counter medications (post-CARES Act)

However, the employer can restrict reimbursement to a subset of these — for example, only covering premiums but not other medical expenses, or covering only specific categories of care. The plan document controls what's reimbursable under your specific HRA.

Common HRA Reimbursement Denials

1. Expense not in the plan's eligible list. Even if IRS Section 213(d) allows it, your specific HRA plan document may exclude certain expense types. Review your Summary Plan Description (SPD) for the exact coverage parameters.

2. Documentation insufficient. HRAs require substantiation of every expense. This means an EOB)" class="auto-link">Explanation of Benefits (EOB) or itemized receipt showing the date of service, provider name, type of service, and amount charged. Submitting a credit card statement is not enough.

3. Expense incurred outside the plan year. HRAs typically reimburse expenses incurred during a specific plan year. An expense from December that you submit in February of the following year may fall outside the reimbursable period if you've passed the run-out deadline.

4. Employee not enrolled in required coverage. ICHRAs require employees to have individual health insurance coverage. If you lose your individual coverage and submit medical expenses, reimbursements may be denied until you re-enroll.

5. Employer underfunded the account. HRAs are a promise from the employer. If the employer set aside $2,000 but you've already been reimbursed $2,000, additional claims will be denied until the next plan year.

erisa">Your Rights Under ERISA

Traditional group HRAs and many employer-sponsored HRA arrangements are governed by ERISA — the Employee Retirement Income Security Act. This gives you important rights:

• Right to plan documents: You can request the Summary Plan Description (SPD) and the full plan document from your employer or plan administrator.
• Right to a claims decision: Under ERISA, benefit claims must be decided within 90 days (standard) or 45 days (disability claims). Extensions are allowed with notice.
• Right to an internal appeal: ERISA plans must provide a full and fair review of denied claims.
• Right to sue in federal court: If your internal appeal is denied and you believe the plan violated ERISA, you can file suit in federal district court.

What to Do If Your HRA Reimbursement Is Denied

Step 1: Request the specific reason for denial in writing. The plan administrator must provide this.

Step 2: Review your Summary Plan Description to confirm the expense should be covered under the plan's terms.

Step 3: Gather documentation — itemized receipts, EOBs, and any physician documentation for the medical necessity of the expense.

Step 4: File a formal written appeal within the timeframe specified in the denial letter (typically 60-180 days under ERISA).

Step 5: If the appeal is denied, consider whether the denial violates ERISA. Consult an employee benefits attorney or contact the Department of Labor's Employee Benefits Security Administration (EBSA) to file a complaint.

Fight Back With ClaimBack

ClaimBack's free AI tool drafts a professional appeal letter in minutes, tailored to your insurer and denial reason. Don't let a denial be the final word.

Fight your denial at ClaimBack →

Related Reading:

• How to Write an Insurance Appeal Letter
• What Is Medical Necessity?
• Internal vs External Insurance Appeal