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Health Reimbursement Arrangements (HRAs): 3 things to know

Health Reimbursement Arrangements (HRAs) are account-based health plans that employers can offer to their employees. They reimburse employees for their medical expenses. Your employer may offer you either an

individual coverage HRA

or a

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).

3 important things to know

  1. An HRA isn’t traditional health coverage through a job

  • It’s an employer-funded group health plan that your employer contributes a certain amount to.

  • You use the money to pay for qualifying medical expenses up to a fixed dollar amount per year. Unused funds may carry over from year to year.

  • For some types of HRA, you can use the money to pay monthly

  1. You must have health coverage to use the HRA

  • For certain types of HRAs, you and any eligible household members must enroll in a health plan (like through the Marketplace) to use the HRA money.

  1. Understand your options before you act

  • Use the decision guide below to avoid paying more for coverage and using more tax credits than you qualify for so that you owe money when you file your taxes.

Do I qualify for Marketplace savings?

When you apply for Marketplace coverage, you’ll find out if you qualify for:

When your employer offers or provides you an HRA, your eligibility for Marketplace savings is determined by:

Warning:An individual coverage HRA offer may impact your eligibility for savings on Marketplace coverage. The only way you’ll qualify for savings to help pay for Marketplace coverage is if you don’t accept the individual coverage HRA and the individual coverage HRA isn’t considered affordable. Learn more about affordability.

HRAs & the affordability standard

The only way you’ll qualify for Marketplace savings and any eligible household members is if your employer’s HRA isn’t considered affordable.

What if my employer offers me an HRA and other coverage?

  • Use the Employer Coverage Tool (PDF, 154 KB) to figure out if you can get Marketplace coverage with savings instead.

  • Confirm you qualify for savings when you apply for Marketplace coverage and tell us what coverage you’re offered from your employer.

Select whether you qualify for savings for more details and next steps:

I qualify for Marketplace savings

If you qualify for the premium tax credit, the HRA isn’t considered affordable. Your next steps depend on your HRA type:

  • If you have an individual coverage HRA and want to get the savings, you must:

  • Enroll in Marketplace coverage to apply the savings. You can’t use both a premium tax credit and the HRA. If you accept your HRA and use the tax credit, you may owe money when you file your federal taxes.

  • Tell your employer you decline (or opt out of) the HRA so you can use the premium tax credit for your Marketplace coverage.

  • If you have a QSEHRA, you can:

  • Use a combination of the premium tax credit and HRA amount, if the QSEHRA is considered unaffordable.

  • You should lower the amount of the premium tax credit you use towards your monthly premiums. When the Marketplace asks how much of the premium tax credit you want to take in advance, subtract your monthly QSEHRA amount from the total premium tax credit amount you qualify for. Complete this worksheet for help to decide how much of the tax credit you should take (PDF, 143 KB).

If you qualify for free or low-cost coverage through Medicaid or CHIP, it doesn’t matter if the HRA is considered affordable.

  • If eligible, we’ll send your information to your state Medicaid agency.

  • If you enroll in Medicaid or CHIP instead of other coverage, tell your employer you’re declining (or opting out of) the HRA.

  • If you don’t enroll in Medicaid or CHIP, you can still apply your HRA to a full-price Marketplace plan.

I don’t qualify for Marketplace savings

If you don’t qualify for a Marketplace plan with the premium tax credit, or for Medicaid or CHIP, you can use your HRA to help pay for coverage instead.

For certain types of HRAs, you and any eligible household members must enroll in a health plan that you bought through the Marketplace or another source, like directly through an insurance company, to use the HRA money.


Individual coverage HRAs

Employers can offer their employees an individual coverage Health Reimbursement Arrangement (HRA) to reimburse medical expenses (like premiums, deductibles and copayments) instead of offering a traditional job-based health plan.

Read the letter you got from them carefully to understand the terms of your coverage. It’ll also say if you’re offered an account-based plan that requires you to enroll in individual market health insurance or Medicare.

How will I know if I have an individual coverage HRA offer?

Most of the time, your employer will send you a letter at least 90 days before the start of the HRA’s 12-month plan year. But, if you become eligible during the HRA plan year or during the 90 days before the plan year starts, like if you’re a new employee, you’ll get the letter no later than the first day your individual coverage HRA coverage can start. The letter will tell you:

  • If the individual coverage HRA is offered to household members.

  • How much your employer will reimburse for medical expenses.

  • The dates the individual coverage HRA starts and ends.

Notice:Keep this letter with other important documents. It includes information you might need when you apply for Marketplace coverage.

Do I still qualify for savings on Marketplace coverage if I'm offered an individual coverage HRA?

It depends. If you have an individual coverage HRA offer from an employer, the only way you’ll qualify for the premium tax credit to help pay for Marketplace coverage is if:

  • Your employer’s individual coverage HRA doesn’t meet minimum standards for “affordability,” and

  • You decline (or opt out) of it.

Learn more about HRAs and the affordability standard.

What happens if I accept an individual coverage HRA offer?

If your employer offers you an individual coverage HRA and you accept it (after you confirm potential savings on Marketplace coverage), you and any eligible household members must either enroll in:

  • Individual health insurance coverage

  • Medicare Parts A (Hospital Insurance) and B (Medical Insurance) or Part C (Medicare Advantage) that starts by the time your individual coverage HRA begins.

If you’re offered an individual coverage HRA that starts January 1

  • Enroll in a Marketplace plan during Open Enrollment by December 15 so Marketplace coverage also starts January 1.

  • You can enroll in individual health insurance coverage through the Marketplace or through a private plan outside the Marketplace.

  • Your employer will ask you to confirm that you and any eligible household members will have individual health insurance coverage (like a plan you bought through the Marketplace) or Medicare the entire time you’ll be covered by the individual coverage HRA and each time you request repayment for qualified medical expenses. Your employer will tell you how to do this.

If you’re offered an individual coverage HRA outside Open Enrollment

If you’re offered an individual coverage HRA outside of the Marketplace’s annual Open Enrollment Period (November 1 – January 15), you may qualify for a

Special Enrollment Period

. This means you’ll need to apply and select a plan so it can take effect by the date that your individual coverage HRA starts.

  • Your employer might offer different options for when your individual coverage HRA can start to give you more time to enroll.

  • Contact them or check your individual coverage HRA letter to find out if this applies to you.


Qualified Small Employer HRAs (QSEHRAs)

Small employers who don’t offer group health coverage to their employees can help employees pay for medical expenses through a

Qualified Small Employer HRAs (QSEHRA)

. If your employer provides you with a QSEHRA, you can use it to help pay your household’s health care costs (like your monthly premium).

Notice:Your employer may call Qualified Small Employer Health Reimbursement Arrangements or QSEHRAs something else. Read the letter you got from them carefully to understand the terms of your coverage. It’ll also say if you’re offered an account-based plan that requires you to enroll in

minimum essential coverage

.

How will I know if I have been provided a QSEHRA?

You'll get a letter from your employer letting you know, along with your QSEHRA dollar amount.

If you have questions about your QSEHRA, including its start date, check your letter first. You can also contact your employer.

What happens if I got a QSEHRA letter from my employer?

You may qualify for a Special Enrollment Period because you newly gained access to a QSEHRA.

  • You can use this

  • You can also enroll in coverage outside of the Marketplace, like directly through a health insurance company or a licensed health insurance agent/broker.

Do I still qualify for savings on Marketplace coverage if I'm provided a QSEHRA?

The amount of your QSEHRA will change the savings you qualify for. You may be eligible for some or no tax credit.

  • When you apply for coverage, the Marketplace won’t know about your QSEHRA. The tax credit amount from your Eligibility Notice won’t account for any help you can get through your employer.

  • So, you may not want to use all of the tax credit from your Eligibility Notice.

Use this worksheet (PDF, 143 KB) to determine how much of the tax credit you should take in advance to lower your monthly premium, based on the amount of your QSEHRA.

Your QSEHRA amount will affect your final eligibility for a premium tax credit when you file next year’s taxes.

  • The Internal Revenue Service will determine your final eligibility for a tax credit based on how much QSEHRA your employer offered you regardless of if you used it.

  • Your final tax credit amount might also be affected by any changes to your income or household you experienced during the year.

  • If you used more tax credit than you’re eligible for, you may have to pay it back when you file.

Learn more about reporting life changes to the Marketplace year-round, so you get the right amount of savings.

How do I use my QSEHRA?

To use the QSEHRA provided by your employer, you and any eligible household members must enroll in minimum essential coverage, like Marketplace coverage, coverage through a family member’s job, or Medicare.

Your employer will ask you to confirm that you and any eligible household members will have coverage the entire time you’ll be covered by the QSEHRA and each time you request repayment for qualified medical expenses. Your employer will tell you how to do this.

How much tax credit should I use?

Use your QSEHRA to help pay for your health coverage and other medical care expenses during the year.

  • When you apply for coverage, the Marketplace won’t know about your QSEHRA. The tax credit amount from your Eligibility

  • Notice won’t account for any help you can get through your employer.

  • So, you may not want to use all of the tax credit from your Eligibility Notice.

  • Use this worksheet (PDF, 143 KB) to determine how much of the tax credit you should use.

  • If you don't lower your tax credit, you may have to pay it back when you file next year's taxes.

  • If you don’t use any of your tax credit during the year, it’s less likely you’ll owe.

  • If you choose to apply some tax credit, we recommended you lower the amount of the tax credit by at least the amount of your QSEHRA. We’ll ask how much tax credit you want to use each month on your application. The worksheet can help you figure this out.

  • If you use less tax credit than you're eligible for, you can still claim the tax credit amount you didn’t use when you file your federal tax return.

If you’re provided a QSEHRA that starts January 1

If your QSEHRA starts on January 1, enroll in a Marketplace plan by December 15 so your coverage also starts January 1.

If you’re provided a QSEHRA outside Open Enrollment

If you’re provided a QSEHRA outside of the Marketplace’s annual Open Enrollment Period (November 1 – January 15), you may qualify for a

Special Enrollment Period

. This means you’ll need to apply and select a plan so it can take effect by the date that your QSEHRA starts.

  • Your employer might offer different options for when your individual coverage HRA can start to give you more time to enroll.

Contact them or check your individual coverage HRA letter to find out if this applies to you.


HSAs, FSAs, & other types of job-based coverage

Employers have many choices when it comes to offering health coverage to their employees. Besides traditional group health plans and Health Reimbursement Arrangements (HRAs), here are some of the other types.

Health Savings Accounts & Flexible Spending Arrangements

There are various health plans to offset health care costs, including:

Learn more about tax-favored health plans, at IRS.gov (IRS Publication 969).

Health Reimbursement Arrangement (HRA)

Health Reimbursement Arrangements (HRAs) are account-based health plans that employers can offer to their employees. They reimburse employees for their medical expenses. Employees get reimbursed tax-free up to the maximum amount the employer will repay for health care costs within a certain amount of time.

Some types of HRAs require you and any eligible household members to have coverage, like a health plan through the Marketplace or other minimum essential coverage, such as a spouse’s job-based health plan, to use them. For more information, visit:





 
 

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