Health Reimbursement Account or Health Reimbursement Arrangement (HRA) is an important component within the concept of tax advantaged financial accounts. Unlike Health Savings Accounts or Flexible Spending Accounts, members cannot withdraw from this variety of financial account. Created specifically for employees, the reigns of an HRA stay with the employer. He does not pay his employees any specified amount as HRA but retains it and reimburses the amount spent by his employees on eligible medical expenses. Employees only get to give directions about how their individual HRA accounts should be handled and to which medical expenditures the deposited amount should be aimed at.
Health Reimbursements were introduced for larger organizations consisting more than 50 employees. The reason can be found primarily in the fact that such organizations cannot offer Medical Savings Accounts (MSA’s). Though an HRA is structured on the lines of an MSA, the difference between the two is the fact that the latter is paid to employees while the former is not. The tax exemption part of Health Reimbursement Accounts was declared in the year 2002. But this rule thereafter was made to apply to only qualifying HRA’s. The deposit in an HRA if not used up during a certain financial is credited towards medical expenditures to be made in the next. Also, employees enrolled under an HRA can choose to use unused deposits, if any, after they leave their current employer.
An HRA is regarded qualifying if it meets two important requirements. Firstly, an employer and only an employer needs to offer it (employers running organizations with over 50 employees). Secondly, it will be considered qualifying if it is aimed only towards larger medical expenditures. Since the focus is amply on the member, HRA is considered as a part of consumer driven health plans.
Different notions exist about this variety of financial accounts. Experts who advocate the existence of HRA’s are of the opinion that the latter brings about improvement in a number of areas. Right from reducing overall costs to bringing more power into the hands of both provider and patient, HRA’s are supposed to have an enormous effect on health insurance in America. Also, another advantage of HRA’s is that they can be enrolled for both low deductible and high deductible health plans.
Detractors of HRA’s are of the opinion that this type of financial accounts makes sure employers have immense control in their hands. According to a popular theory, employers offering HRA’s to their employees tend to offer lesser benefits since they exercise major control over the accounts. This may not be good news for employees enrolled under HRA. Also, another demerit of HRA’s is supposed to be the reverse effect on premiums. In fact premiums are often seen shooting up as far as HRA’s are concerned.