A Health Reimbursement Arrangement (HRA) is an IRS-approved, employer-funded health benefit that reimburses employees tax-free for qualified medical expenses and, in some cases, individual health insurance premiums. It's not an account like an HSA or FSA. There's no cash balance you own. Instead, it's a promise from your employer to pay back eligible expenses up to a set amount. That's a big deal for employers looking to control costs while offering benefits that fit their people's needs. WellthCare™, the first Health-to-Wealth™ Benefit System, goes further by paying employees back for preventive health actions with Store dollars and automatic retirement contributions, while providing $0-co-pay care and adding no new out-of-pocket cost for employers.
The mechanics are simple. You pay for a qualified expense (a doctor's co-pay or a prescription) out of pocket, then submit proof such as an invoice or Explanation of Benefits to your HRA administrator. If the claim is approved, your employer reimburses you tax-free, up to your allowance.
The Main Types of HRAs
The 21st Century Cures Act and later rules created several HRA types. The right choice depends on company size, budget, and what you want the benefit to do.
1. Individual Coverage HRA (ICHRA)
The ICHRA is the most flexible option. With an ICHRA, employers of any size provide a tax-free allowance that employees use to buy their own individual health insurance plan on the marketplace (or off-exchange) and to reimburse other medical expenses. It gives employees control over their insurance choice, backed by employer funds. One important limit applies. An employee offered an affordable ICHRA cannot also claim a marketplace premium tax credit. If the ICHRA is unaffordable, the employee can opt out of the reimbursements and claim the credit.
- Full Flexibility: Employers can set different allowance amounts for distinct classes of employees, such as full-time versus part-time or by geographic location.
- No Group Plan Required: You do not need a traditional group plan for these employees, which saves cost and administrative work.
- Employee Choice: Employees pick the plan that works for them. The individual policy is portable, though unused HRA funds generally stay with the employer.
2. Qualified Small Employer HRA (QSEHRA)
For employers with fewer than 50 full-time employees, counting full-time equivalents, and no group health plan, the QSEHRA fits. The IRS sets annual limits, which for 2026 are $6,450 for individual coverage and $13,100 for family coverage. Reimbursements can cover medical expenses and premiums. Employees offered an affordable QSEHRA cannot claim a marketplace premium tax credit; if the QSEHRA is unaffordable, the credit is reduced dollar-for-dollar by the QSEHRA amount.
3. Excepted Benefit HRA (EBHRA)
This one works alongside a group health plan. If you already offer a group plan, you can add an EBHRA to cover extras like dental and vision premiums, copays, and deductibles. The 2026 cap is $2,200 per employee. You cannot use it for individual market or group health plan premiums.
Key Advantages of Implementing an HRA
HRAs benefit both sides. For employers, they offer fixed, predictable costs with no surprise premium hikes, less administrative work, allowances customizable by employee group, and a stronger recruiting pitch. For employees, they offer tax-free reimbursements that cut out-of-pocket costs. With an ICHRA, you own your insurance choice and spend on what matters to you.
What an HRA Does Not Do
An HRA changes who pays for care; it does not change what care costs. It reimburses after the fact, so an employee still fronts the expense and waits for approval. The employer owns the funds until they are paid out, so unused money typically stays with the employer when someone leaves, though some HRAs allow a limited rollover. An HRA also does not negotiate prices or deliver care; it pays eligible bills from whatever plan the employee carries.
An HRA is a reimbursement tool rather than a care-delivery system. If a workforce would be better served by care that is paid at the point of use, a reimbursement-only arrangement can fall short. That gap is what WellthCare addresses by providing $0-co-pay care used first, alongside the primary plan, and adding reward dollars for verified preventive actions rather than asking employees to pay upfront and wait for reimbursement.
Compliance and Administration Considerations
HRAs come with strict rules. You need a written plan document and a summary plan description for employees, and the plan must follow non-discrimination rules. ICHRAs and QSEHRAs add a written notice requirement, and participants must receive it at least 90 days before each plan year begins. Most employers hire an HRA administrator to handle claims, documents, and support, which turns a complex product into a smooth benefit.
HRAs are moving benefits from one-size-fits-all to a defined contribution model. Done right, employers win on cost and flexibility; employees win on choice and support. That's the same thinking behind models like WellthCare, which redesign benefits so every healthcare dollar works harder for both health and wealth.