Medical Expense Reimbursement Accounts
Medical expense reimbursement accounts are IRS approved, employer-funded group health benefit plans from which employees are reimbursed tax-free for qualified medical expenses. The employer funds and owns the account. These types of accounts are not considered health insurance.
For more information related to accounts listed below, visit www.irs.gov.
- Health Savings Account (HSA)
HSAs are tax-exempt accounts set up by an employer or individual to pay expenses including deductibles, co-payments, and other out-of-pocket prescribed medical expenses. An HSA must be established with a high deductible health plan. The HSA is used to pay routine expenses and the health plan is used to pay more significant expenses.
HSAs allow employers and consumers to set aside funds on a tax-free basis to pay health care expenses, including expenses that may not be covered by traditional health coverage. For example, HSAs may be used for vision and dental services, prescription drugs, over-the-counter drugs (if you have a prescription for them), long-term care services, and certain health insurance premiums during retirement.
- Health Reimbursement Account (HRA)
HRAs are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over to be used in subsequent years. The employer funds and owns the account. Health Reimbursement Accounts are sometimes called Health Reimbursement Arrangements.
- Individual Coverage Health Reimbursement Account (ICHRA)
Effective January 1, 2020, employers can begin offering employer-funded ICHRAs as an alternative to traditional group health plan coverage. ICHRAs are arrangements under which employees are reimbursed tax-free for qualified medical care expenses and premiums paid for individual health insurance you’ve chosen, up to a certain dollar amount for the plan year. Unused funds can be rolled over to be used in subsequent years. If you enroll in an ICHRA, you must also be enrolled in an individual health insurance plan purchased on or off the Exchange, or Medicare (Part A and B, or C) for each month you’re enrolled in the ICHRA.
- Excepted Benefit Health Reimbursement Account (EBHRA)
Effective January 1, 2020, employers can begin offering employer-funded EBHRAs in conjunction with a traditional group health plan. The annual EBHRA employer contribution is limited to $1,800 (indexed for inflation beginning in 2021). Employees may enroll in the EBHRA even if they do not enroll in the traditional group health plan or any other coverage. EBHRAs are arrangements under which employees are reimbursed tax-free for qualified medical care expenses and premiums paid for excepted benefits, such as dental and vision coverage, as well as for Short Term Limited Duration Insurance (STLDI). EBHRAs cannot be used to reimburse individual health insurance premiums, group health plan premiums (other than COBRA), or Medicare premiums. Unused funds can be rolled over to be used in subsequent years.
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