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Health Reimbursement Arrangement


HRAs, employer-funded accounts that employees can draw upon to pay qualified medical expenses, are usually offered as part of consumer-directed health plans (CDHPs), a fast-growing marketplace solution to rising health care costs.

As most commonly constructed, HRAs are linked with high-deductible health plans that include preventive care not charged against the deductible.  Employees can use the fund to pay qualified medical expenses or roll over unused funds at year end for future use.  Most HRA members who use up the fund then have to meet a deductible for medical expenses before major medical coverage kicks in.  With the opportunity to determine how and when their health care dollars are used, HRA members have an incentive to become informed and value seeking health care consumers.

HRA-based health plans provide employers with an important new benefits option, one that helps raise consumer awareness of the real costs of health care while empowering consumers with greater decision-making control over their health care spending.  HRA health plans usually include a high deductible, and research shows that total health spending is reduced when consumers bear more responsibility for their health care expenses.

Members of an HRA plan who do not use all of their fund or account in one year can roll over unused funds for use at a later time for medical expenses, COBRA benefits, long-term care or Medicare premiums.

HRA-based plans facilitate access to quality care because preventive care, such as routine physicals and child immunizations, typically is covered 100 percent and is not charged against the employee's fund.

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