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

A health reimbursement account (HRA) is a fund that your employer creates and controls. The employer puts money into it, and you use that money to pay for medical expenses—doctor visits, prescriptions, dental work, vision care, and other health costs. The employer decides how much to contribute each year, what medical expenses the account covers, and what happens to unused money at the end of the year.

The key difference from other health accounts: you do not own the HRA. Your employer owns it. You can only spend the money on medical bills, and only the ones your employer's plan says are allowed. If you leave the job, the money stays with the employer—you cannot take it with you.

HRAs are tax-free, meaning the money your employer puts in is not counted as income you owe taxes on, and the money you spend from the account is not taxed either. This makes them valuable for both employers and workers, but only if you actually use the funds before they expire.

Key Takeaways

  • Your employer funds and owns the HRA; you cannot contribute your own money to it, and you lose any unused balance if you leave the job.
  • You can use HRA money only for medical expenses your employer's plan covers, which typically includes doctor visits, prescriptions, dental, and vision care.
  • Money in an HRA is tax-free both when your employer contributes it and when you spend it on covered medical costs.
  • Unused HRA funds may roll over to the next year, be forfeited, or be returned to your employer depending on your plan's rules.
  • An HRA is different from an HSA (health savings account), which you own, can take with you when you leave, and can invest.

How an HRA is funded and what you can spend it on

Your employer decides the annual contribution amount—there is no legal minimum or maximum, though the IRS sets limits on how much can be reimbursed in a year depending on your plan type. The employer deposits this money into an account in your name, but they retain ownership and control.

You spend HRA money by submitting a claim. When you receive a medical bill, you pay it yourself first, then submit a receipt or explanation of benefits (EOB) to your employer's benefits administrator. They review the claim, confirm it is a covered expense, and reimburse you from the HRA. Some employers also issue a debit card linked to the HRA so you can pay at the point of service without submitting a claim later.

Covered expenses typically include doctor office visits, hospital care, prescription drugs, dental work, vision exams and glasses, mental health treatment, and physical therapy. Your employer's plan document lists exactly what is covered. Some plans are broad; others exclude certain services like cosmetic procedures or over-the-counter medications without a prescription.

What happens to money you do not spend

This is where HRAs differ most from HSAs. At the end of the plan year, any money left in your HRA does not automatically roll over to you or to the next year. Your employer decides the fate of unused funds based on the plan rules.

Some employers allow unused HRA money to roll over to the next year, up to a certain amount (often called a "carryover" or "grace period"). Others require you to use it or lose it—meaning any balance remaining after a set deadline (usually 60 to 90 days into the new year) is forfeited and returned to the employer. A few plans let you carry over a small amount and lose the rest.

If you leave your job, you forfeit any unused HRA balance. Unlike an HSA, which you own and can take with you, an HRA stays with the employer. You may be able to continue using the HRA for a limited time under COBRA (Consolidated Omnibus Budget Reconciliation Act), but you will have to pay the full cost of the employer's contribution yourself, which is usually expensive.

HRA versus HSA and other health accounts

An HSA (health savings account) is often confused with an HRA because both are tax-free and used for medical expenses. The differences matter. You own an HSA; your employer owns an HRA. You can contribute to an HSA yourself and take it with you when you change jobs. An HSA has no "use it or lose it" rule—unused money rolls over forever and can be invested. An HRA is employer-funded only, forfeited when you leave, and subject to the employer's rules on carryover.

A Flexible Spending Account (FSA) is also employer-funded and has a "use it or lose it" rule, but FSAs have a lower annual limit than HRAs and are more common for smaller employers. Like an HRA, you lose FSA money when you leave the job.

A PPO (Preferred Provider Organization) or HMO (Health Maintenance Organization) is health insurance itself, not a reimbursement account. An HRA often works alongside these insurance plans—the insurance covers major medical costs, and the HRA covers deductibles, copays, and other out-of-pocket expenses.

How to use your HRA and track your balance

When you enroll in your employer's health plan, you should receive a summary of your HRA benefits. This document explains the annual contribution amount, what expenses are covered, how to submit claims, and what happens to unused money. Read it carefully, because the rules vary by employer.

To submit a claim, gather your receipt or EOB and contact your benefits administrator—usually through an online portal, by mail, or by phone. Keep copies of all receipts and claim confirmations. Most administrators provide an online account where you can check your balance, view claim history, and submit new claims.

Plan your spending strategically. If your employer allows carryover, you can be conservative and let money accumulate. If your plan has a "use it or lose it" rule, spend down the account before the deadline by scheduling dental work, vision exams, or other planned medical care. Some employers offer a grace period of 60 to 90 days into the new year to submit claims for expenses incurred in the prior year.

What to do if you leave your job or your employer changes the plan

If you resign or are laid off, you lose access to your HRA immediately in most cases. Any unused balance is forfeited. Before you leave, submit any pending claims and use up as much of the balance as possible. If you have a large balance remaining, ask your benefits administrator whether you can submit claims for recent medical expenses you have not yet claimed.

If you are offered COBRA continuation coverage, you may be able to continue using the HRA, but you will pay the full premium yourself—both the insurance cost and the employer's contribution to the HRA. This is rarely affordable for more than a few months.

If your employer changes or cancels the HRA plan mid-year, they must notify you and explain what happens to your balance. Some employers allow you to keep the money already in the account; others may require you to spend it by a certain date or lose it. Check the plan change notice carefully.

Frequently Asked Questions

Can I take my HRA with me if I change jobs?

No. Your employer owns the HRA, and any unused balance stays with them when you leave. Unlike an HSA, which you own and can transfer to a new employer's plan or keep in an individual account, an HRA is forfeited upon termination. You may continue using it under COBRA, but you pay the full cost yourself.

What if I do not use all my HRA money by the end of the year?

It depends on your employer's plan. Some allow unused money to roll over to the next year (up to a limit), others have a grace period of 60 to 90 days to submit claims for prior-year expenses, and some have a strict "use it or lose it" rule. Check your plan document or ask your benefits administrator which rule applies to you.

Can I use my HRA to pay for my spouse or children?

Yes, if they are covered under your health plan. You can use HRA money to pay for medical expenses for anyone on your policy. If your spouse or children are on a separate plan, you cannot use your HRA to pay their bills.

Is an HRA the same as health insurance?

No. An HRA is a reimbursement account that helps pay out-of-pocket medical costs. Health insurance is a separate policy that covers doctor visits, hospital stays, and other care. Many employers offer both—the insurance covers major medical costs, and the HRA covers deductibles and copays.

What happens to my HRA if I go on unpaid leave or take a sabbatical?

If you remain employed but are not actively working, your HRA typically stays active and you can continue to use it. However, your employer may stop contributing during the unpaid period. Confirm the policy with your benefits administrator before taking leave.