Health Reimbursement Arrangement (HRA)

A Health Reimbursement Arrangement (HRA) is an employer-funded account that reimburses employees for qualified medical expenses, including premiums. Unlike an HSA, which employees own and can take with them, an HRA is entirely funded by the employer, and unused balances typically don't roll over or belong to the employee when they leave the company. The employer sets the rules — what's reimbursable, how much is available, and whether balances carry forward.

There are several HRA types that matter in the modern benefits landscape. A traditional integrated HRA is paired with a group health plan and reimburses cost-sharing like deductibles and copays. An Individual Coverage HRA (ICHRA), introduced in 2020, lets employers of any size reimburse employees for individual market premiums and out-of-pocket costs instead of offering a group plan — a significant shift that allows employers to exit the group insurance market entirely while still providing meaningful health benefits. A Qualified Small Employer HRA (QSEHRA) serves the same purpose for small employers under 50 employees with a lower contribution cap. The HRA design flexibility makes it appealing for employers whose workforce demographics make a single group plan inefficient — a company with a mix of young part-timers, older full-timers, and employees across states may find the ICHRA gives each person access to a plan that actually fits their situation rather than forcing everyone into the same group design.

The takeaway: HRAs have become a meaningful alternative to traditional group health plans for small and mid-size employers. The ICHRA in particular is worth modeling for companies considering exiting the group market — it can provide comparable value at lower administrative complexity and sometimes lower total cost.