Health Reimbursement Medical Plans offer businesses an IRS-approved way to reimburse employees, their spouses, and dependents tax-free for eligible medical expenses, including personal insurance premiums. Health Reimbursement Medical Plans are formally called Health Reimbursement Arrangements or HRAs. Because the reimbursement occurs pre-tax via payroll, employees and employers often save up to 50% in combined taxes on the cost of medical expenses.
Health Reimbursement Medical Plans - Overview
Health Reimbursement Medical Plans give employers greater control over monthly health benefits costs, and give employees more choice in their health care coverage. With a Health Reimbursement Medical Plan, the employer sets their own parameters, including:
What categories of medical expenses are covered
Maximum contribution per employee class
What happens to unused funds at the end of the plan year
Health Reimbursement Medical Plans must be funded solely by the employer, and cannot be funded by the employee through salary deductions. Health Reimbursement Medical Plans are not subject to the same plan design requirements that apply to Flexible Spending Accounts and Section 125 cafeteria plans.
Health Reimbursement Medical Plans by Another Name
The term "Health Reimbursement Medical Plan" is synonymous with many other terms, and can be used interchangeably with the following:
Health Reimbursement Arrangement (HRA)
Health Reimbursement Plan (HRP)
Medical Expense Reimbursement Plan (MERP)
Medical Reimbursement Plan (MRP)
Health Reimbursement Arrangement is the most common term, and term the IRS formally uses to define Health Reimbursement Medical Plans.
