What's a health reimbursement arrangement and how does it work?

Who is this for?

Michigan Health Insurance – Customer Service – Health Spending Accounts

If you're interested in health reimbursement arrangements, or if you have one already, this information can help you understand what they are, how they work and how you can use them to pay for qualified medical expenses.

An HRA is a health reimbursement arrangement, commonly referred to as a health reimbursement account, your employer funds to help you pay for qualified medical expenses, such as your deductible or copay. You can pair them with any health insurance plan.

How does it work?

Your employer sets aside a set amount of money to your HRA each year for you to use. Unlike other health spending accounts, only your employer can put money into your HRA. The money is available to you at the beginning of the year.

How do I use it?

When you go to the doctor or hospital, the money in your HRA will cover qualified medical expenses. The majority of our members with an HRA will have a seamless payment process. Your doctor will bill us and we'll use the funds from your HRA to pay. You'll see the payment listed on your explanation of benefits, or EOB, as well as your online account.

If you use up all the funds in your HRA before the end of the year, you'll have to pay any additional out-of-pocket costs. If you have money left over, your employer may let it roll over to the next year.

What can I spend it on?

Your employer decides which qualified medical expenses are eligible, but HRAs typically cover:

  • Deductibles
  • Coinsurance
  • Copays (only for PPO)

You can't use an HRA to pay for monthly health insurance premiums.

What are the advantages of an HRA?

HRAs have some benefits that can help you save on health care costs.

  • Affordability: Premiums for health insurance plans offered with an HRA are generally less per month than other plans.
  • Employer contributions: Your employer fully funds your HRA with no contributions from you.

What happens to my HRA when I leave my employer?

Your employer owns your account and can decide whether you can take the money if you leave your job. You may be able to continue using it for qualified medical expenses.

Not sure if your employer offers an HRA? Contact your Human Resources department to find out.