What a Health Reimbursement Account Is

A Health Reimbursement Account (HRA) is an account your employer funds to pay for your medical expenses. You don't contribute money to it—your employer does. When you pay out of pocket for a covered medical expense, you submit a receipt to your employer or the plan administrator, and they reimburse you from the HRA. The money in the account belongs to your employer, not you, which is the key difference from a Health Savings Account (HSA) where you own the funds.

HRAs are tied to your job. If you leave the company, you typically lose access to any unused balance—the money doesn't follow you. Some employers allow you to carry over a small amount to the next year, but most don't. The employer decides what medical expenses the HRA covers, what the annual contribution is, and how the reimbursement process works.

Key Takeaways

  • Your employer funds the HRA entirely; you contribute nothing, and the money remains their property until you use it for covered expenses.
  • You pay for medical care out of pocket, then submit receipts to get reimbursed from the account.
  • HRAs are only available through an employer and end when you leave the job—unused money does not transfer with you.
  • Your employer sets the rules: which expenses are covered, how much they contribute each year, and whether unused funds roll over.
  • You cannot use HRA funds for insurance premiums, over-the-counter medications without a prescription, or cosmetic procedures unless your employer's plan covers them.

How Money Flows Into and Out of Your HRA

Your employer deposits a set amount into your HRA at the start of each plan year—often January 1st, though some companies use different dates. The amount varies by employer and sometimes by your salary or job level. You have no say in how much goes in; your employer decides this unilaterally. Some employers contribute the same amount every year; others adjust it based on company performance or changes to the health plan.

When you incur a medical expense, you pay for it yourself using your personal funds, credit card, or debit card. You then gather the receipt or explanation of benefits (EOB) from your provider and submit it to the plan administrator—usually through an online portal, by mail, or by email. The administrator verifies that the expense is covered under your plan's rules, and if it is, they reimburse you. Reimbursement typically takes one to two weeks, though some plans process faster.

Any balance remaining in your HRA at the end of the plan year is forfeited unless your employer allows a carryover. A small number of employers permit you to carry over up to $550 (this limit changes annually) into the next year, but most do not. This is why it matters to track what you've spent and what remains—you can't save HRA money for retirement or future years the way you can with an HSA.

What Expenses the HRA Covers

Your employer's HRA plan document lists which medical expenses are reimbursable. Common covered expenses include doctor visits, prescription medications, dental work, vision care, mental health treatment, physical therapy, and hospital stays. However, your employer can exclude any of these categories if they choose. Some plans cover only preventive care; others cover nearly all medical costs.

Expenses that are typically not covered include over-the-counter medications (unless prescribed by a doctor), cosmetic procedures, gym memberships, vitamins, and insurance premiums themselves. If you have a high-deductible health plan paired with your HRA, the HRA can help you meet the deductible, but the rules depend on your employer's plan design.

To know exactly what your HRA covers, read your plan's summary of benefits and coverage (SBC) or the plan document itself. If the document is unclear, contact your benefits administrator or HR department. Don't assume a common expense is covered—ask first, because submitting a receipt for an ineligible expense wastes time and gets denied.

The Reimbursement Process and Timeline

Reimbursement begins when you submit a claim. Most employers now use an online portal where you upload your receipt or EOB. Some still accept paper claims by mail or email. You'll need to provide the date of service, the provider's name, the amount paid, and proof that you paid it (a receipt or EOB showing your out-of-pocket cost).

The plan administrator then reviews your claim to confirm it meets the plan's coverage rules. If it does, they approve it and send the reimbursement to your bank account or by check, usually within 5 to 14 business days. If the claim is incomplete or the expense isn't covered, they'll deny it or ask for more information. You can appeal a denial, though the process and timeline vary by plan.

Some employers offer a debit card linked to the HRA, which lets you pay directly at the point of service without submitting receipts later. If your employer offers this, you can use the card at pharmacies, doctor offices, and hospitals. However, you may still need to submit receipts periodically to prove the charges were for may be able to access expenses.

HRA vs. HSA: The Main Differences

An HRA and an HSA are both tax-advantaged accounts for medical expenses, but they work very differently. An HSA is owned by you; an HRA is owned by your employer. If you leave your job, you keep your HSA and its balance forever. If you leave a job with an HRA, you lose the unused balance. HSAs require you to be enrolled in a high-deductible health plan; HRAs can pair with any health plan. You contribute to an HSA with pre-tax money from your paycheck; your employer funds an HRA.

HSAs are portable and can be invested for long-term growth. HRAs are not—they're meant to reimburse current-year expenses. If you have both an HRA and an HSA (some employers offer both), your employer's plan document will specify how they coordinate and whether you can use both to pay for the same expense.

What Happens to Unused HRA Money

At the end of each plan year, any balance you haven't used is forfeited. This is called the "use-it-or-lose-it" rule, and it applies to most HRAs. If your employer contributed $2,000 and you spent $1,200, the remaining $800 disappears. You cannot roll it over to next year, carry it forward to retirement, or transfer it to another account.

A small percentage of employers allow a carryover of up to $550 per year (the IRS limit, which adjusts annually). If your plan allows this, unused funds roll into the next plan year and you can use them then. Some employers also offer a grace period—usually 2.5 months after the plan year ends—during which you can still submit claims for expenses incurred in the prior year. Check your plan document or ask HR whether your HRA allows either of these options.

Because of the use-it-or-lose-it rule, it's worth tracking your HRA balance throughout the year. If you're approaching the end of the plan year with a large balance, you might schedule elective procedures, stock up on prescription refills, or purchase medical equipment you know you'll need. This isn't wasteful—it's using money your employer already set aside for your health care.

How HRAs Affect Your Taxes

HRA reimbursements are tax-free. When your employer reimburses you for a covered medical expense, you don't report that money as income, and you don't pay federal income tax, Social Security tax, or Medicare tax on it. This is one of the main benefits of an HRA—the money goes directly to medical care without a tax hit.

However, you cannot deduct the same expense twice. If your employer reimburses you through the HRA, you cannot also claim that expense as a medical deduction on your tax return. The IRS treats the reimbursement as full payment, so there's no additional deduction available.

If you're self-employed or have a side business, you cannot set up an HRA for yourself—only employers can establish them. Self-employed people typically use an HSA or a Solo 401(k) with a health savings component instead.

Frequently Asked Questions

Can I use my HRA to pay for my spouse's or children's medical expenses?

Yes, if they are covered under your employer's health plan. If your spouse or children are on your plan, their medical expenses are may be able to access for HRA reimbursement. If they have separate coverage through another employer, check that employer's HRA rules—they would need to use their own HRA instead.

What happens to my HRA if I leave my job mid-year?

You typically lose access to the unused balance immediately or at the end of the plan year, depending on your employer's plan. Some employers allow you to submit claims for expenses incurred before your departure date for a short window after you leave. Contact your HR department or benefits administrator to confirm the exact cutoff date and whether you can still file claims.

Can I use my HRA to buy health insurance?

No. HRA funds cannot be used to pay premiums for health insurance, dental insurance, vision insurance, or long-term care insurance. They can only be used for out-of-pocket medical expenses and cost-sharing (copays, coinsurance, deductibles) on your current plan.

Do I need receipts to get reimbursed from my HRA?

Yes. You must submit proof of the expense—a receipt from the provider, a pharmacy receipt, or an explanation of benefits from your insurance company showing what you paid out of pocket. Without documentation, the plan administrator cannot process your claim.

Can I carry over HRA money to the next year?

Most employers do not allow carryover; unused funds are forfeited at year-end. Some employers permit a carryover of up to $550 annually. Check your plan document or ask your HR department whether your specific HRA allows carryover.