A health reimbursement account is money your employer sets aside to pay your medical bills

A health reimbursement account (HRA) is an employer-funded account that reimburses you for out-of-pocket medical expenses. Your employer decides how much money goes into the account each year—you do not contribute to it from your paycheck. When you pay for a doctor visit, prescription, dental work, or other covered medical service, you submit a receipt or claim form and the HRA pays you back.

The key difference from a health insurance plan is that an HRA is a reimbursement tool, not insurance itself. You still need health insurance (usually provided by the same employer). The HRA sits on top of that insurance and covers costs your insurance does not—like deductibles, copays, and services your plan excludes.

HRAs are entirely funded by your employer. You cannot add your own money to the account. The employer owns the account and sets the rules: how much money is available each year, which medical expenses count, and what happens to unused money at the end of the year.

Key Takeaways

  • Your employer funds the HRA and decides the annual amount; you contribute nothing from your paycheck.
  • You use the HRA to reimburse yourself for medical expenses your insurance does not cover, like deductibles and copays.
  • Unused money may roll over to the next year or be forfeited, depending on your employer's plan design.
  • HRAs are tax-free when used for may have access to medical expenses, meaning reimbursements do not count as taxable income.
  • You must submit receipts or claim forms to get reimbursed; the money does not automatically appear in your bank account.

How HRA reimbursement actually works

When you incur a medical expense, you pay for it out of pocket first. Then you gather the receipt or explanation of benefits (EOB) from your provider and submit a claim to your HRA administrator—usually through an online portal, by mail, or by phone. The administrator reviews the claim to confirm the expense is covered under your plan and that you have not already been reimbursed for it.

Once approved, the reimbursement is sent to you. Some employers deposit it directly into your bank account; others issue a check or load it onto a debit card. The timeline varies—some administrators process claims within days, others take two to three weeks. You should ask your HR department how long reimbursements typically take at your company.

Some employers offer a debit card linked to the HRA, which lets you pay for medical expenses directly without submitting a claim afterward. This is faster but less common. Most HRAs still require the claim-and-reimburse process.

What expenses the HRA covers

HRAs can reimburse a broad range of medical expenses, but your employer's plan document determines the exact list. Common covered expenses include deductibles, copays, coinsurance, prescription drugs, dental work, vision care, mental health treatment, physical therapy, and medical equipment like crutches or hearing aids.

Some expenses are not covered by any HRA, regardless of plan design. Over-the-counter medications (unless prescribed by a doctor), cosmetic procedures, gym memberships, and vitamins typically do not may have access to. Your employer's plan summary should list what counts; if it is unclear, ask your HR department or the HRA administrator before submitting a claim.

The IRS maintains a detailed list of may have access to medical expenses in Publication 502. If an expense is on that list and your employer's plan does not exclude it, it should be reimbursable.

What happens to unused HRA money

This is where HRA rules vary significantly by employer. Some plans allow unused money to roll over to the next year, so if you do not spend the full amount, you keep it. Other plans use a "use-it-or-lose-it" rule: any money left in the account at the end of the year is forfeited and returned to the employer.

A few employers offer a grace period—usually 2.5 months into the next year—during which you can still submit claims for expenses incurred in the prior year. This gives you time to gather receipts and file claims without losing the money when ready.

Before the year ends, check your plan documents or ask HR whether your HRA allows carryover. If it does not, you may want to schedule medical or dental work before December 31 to use the money rather than lose it.

HRA versus FSA and HSA

Three account types help pay medical expenses, and they work differently. An HRA is employer-funded only, and you get reimbursed after you pay. A Flexible Spending Account (FSA) lets you contribute pre-tax money from your paycheck, and you can use a debit card to pay directly at the point of service. An HSA (Health Savings Account) is also funded by you, but it rolls over year to year and can be invested like a retirement account.

The main advantage of an HRA is that you do not have to decide in advance how much money to set aside—your employer decides. With an FSA or HSA, you choose the amount and risk losing it (FSA) or having it sit unused (HSA). The main disadvantage of an HRA is that you have less control: the employer sets the rules and can change them.

Some employers offer more than one account type. You might have an HRA plus an FSA, for example. The rules about which expenses each account covers and how they work together vary by employer.

Tax treatment of HRA reimbursements

Money you receive from an HRA for may have access to medical expenses is not taxable income. You do not report it on your tax return, and your employer does not issue a W-2 or 1099 for HRA reimbursements. This is one of the main benefits of the account—you get the money tax-free.

This tax-free status applies only to may have access to medical expenses as defined by the IRS. If you submit a claim for something that does not may have access to and the HRA pays it anyway, that reimbursement may be taxable. This is rare but can happen if you or the administrator make a mistake. Keep receipts for all claims you submit so you can prove the expense was may have access to if the IRS ever asks.

What to do if your employer changes or closes the HRA

If you change jobs, your HRA stays with your old employer—you cannot take it with you. Any unused balance is typically forfeited unless your old employer's plan allows you to continue coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act). COBRA lets you pay to stay on your employer's health plans after you leave, including the HRA, but the cost is usually high.

If your employer closes the HRA while you are still employed, they must notify you and explain what happens to your balance. Some employers pay out the remaining balance to employees; others forfeit it. Your plan documents should specify this, but if they do not, ask HR directly.

When you start a new job, ask whether the new employer offers an HRA. If they do, the new HRA is a separate account with its own balance and rules. There is no way to transfer money from your old employer's HRA to the new one.

Frequently Asked Questions

Can I use my HRA for my spouse or children?

Yes, if they are covered under your health insurance plan. You can submit claims for their medical expenses and be reimbursed. If they are not on your plan, you cannot use your HRA for their expenses. Check your plan documents or ask HR whether family members are covered.

What if I submit a claim and it gets denied?

The HRA administrator will send you a denial letter explaining why. Common reasons include the expense not being on the may have access to list, a duplicate claim, or missing documentation. You can usually appeal the denial by providing additional information or clarification. Ask the administrator for their appeal process.

Do I have to use my HRA, or can I just leave the money there?

That depends on your plan. If your HRA allows carryover, unused money stays in the account. If it uses a use-it-or-lose-it rule, you forfeit any balance at year-end. Check your plan documents or ask HR which rule applies to you.

Can I withdraw HRA money for non-medical expenses?

No. If you withdraw money for something that is not a may have access to medical expense, that withdrawal is taxable income and you may owe taxes and penalties. The HRA is designed specifically for medical costs, and the tax-free status depends on using it that way.

What documents do I need to submit a claim?

You need a receipt showing what you paid for and the amount, or an explanation of benefits (EOB) from your insurance showing the out-of-pocket cost. For prescriptions, a pharmacy receipt works. For doctor visits, ask the provider's office for an itemized receipt. Your HRA administrator can tell you exactly what they need before you submit.