What Is an HRA? Health Reimbursement Arrangements Explained

An employer wants to help with employees’ medical costs without taking on the risk of a fully insured group plan, or without offering a plan at all. An HRA is usually the tool that does that.

Here’s what an HRA is, the different types employers use, and how it’s different from an HSA.

What Is an HRA?

HRA stands for Health Reimbursement Arrangement. It’s an employer-funded account that reimburses employees, tax-free, for qualified medical expenses and, depending on the type, individual health insurance premiums. Unlike an HSA, the employer owns and funds the account entirely. Employees don’t contribute their own money, and unused funds typically don’t belong to the employee if they leave the company, though employers can choose to let balances roll over.

The core appeal for employers is control. The company sets the reimbursement amount, decides what counts as an eligible expense within IRS rules, and isn’t exposed to the premium volatility of a fully insured group plan.

Common Types of HRAs

• QSEHRA (Qualified Small Employer HRA): designed for businesses with fewer than 50 full-time employees that don’t offer a group health plan at all. Employers reimburse employees for individual health insurance premiums and qualified medical expenses, up to an annual IRS-set limit.
• ICHRA (Individual Coverage HRA): available to employers of any size, with no annual contribution cap set by the IRS. Employers can offer different reimbursement amounts to different employee classes, such as full-time versus part-time, as long as the classes are defined consistently.
• Excepted Benefit HRA: a smaller-dollar HRA that can be offered alongside a traditional group health plan to reimburse expenses like copays, deductibles, and some premiums for excepted benefits such as dental or vision.
• Integrated HRA: paired with an employer’s existing group health plan to reimburse deductibles, copays, and coinsurance, effectively lowering the employee’s out-of-pocket cost for the plan the employer already offers.

HRA vs. HSA: What’s the Difference?

The two get confused constantly because both reimburse medical expenses tax-free, but the ownership and funding structure is completely different. An HSA is owned by the employee, funded by employee and often employer contributions, portable between jobs, and requires enrollment in a high-deductible health plan. An HRA is owned and funded entirely by the employer, isn’t portable in the same way, and doesn’t require a high-deductible plan for every HRA type.

In practice, HRAs tend to appeal to employers who want to control cost and design without requiring employees to carry a specific plan type, while HSAs appeal to employers who already offer a high-deductible plan and want to give employees a portable, employee-owned savings vehicle.

Why Employers With Hourly or Part-Time Workforces Use HRAs

Traditional group health insurance is expensive to extend to a large part-time or seasonal workforce, and many employees in these roles decline it anyway due to eligibility waiting periods or cost. An ICHRA in particular lets employers offer a real health benefit, sized appropriately by employee class, without taking on a full group plan for a workforce where enrollment would be low and administratively heavy.

This is common in restaurants, hospitality, and retail, where full-time managers might get one reimbursement class and part-time hourly staff get a smaller, still-real benefit rather than nothing at all.

Administering an HRA

HRAs require documentation: a formal plan document, a defined reimbursement amount by class, and a process for verifying that reimbursed expenses are actually IRS-qualified. Getting this wrong can create tax liability for both the employer and the employee, so most employers run HRAs through a benefits administration platform or a third-party administrator rather than tracking reimbursements manually.

Netchex’s benefits administration tools help employers set up and manage HRA classes alongside traditional benefits enrollment, so eligibility, reimbursement amounts, and documentation stay organized in the same system as the rest of HR.

Frequently Asked Questions

This guide reflects publicly available product information and independent reviewer data (G2, Capterra, Trustpilot, Yelp, Better Business Bureau, Reddit, Software Advice, GetApp) as of 2026. Feature availability and pricing may vary by plan. Contact each provider for current details.

Disclaimer: Any product roadmap or future plans provided herein are for informational purposes only. They do not represent a commitment to deliver any material, code, feature, or functionality. Plans may change without notification. The development, release and timing of any features or functionality described remain at the sole discretion of Netchex, its affiliates, and partners. Netchex does not give legal, tax, or accounting advice. You are responsible for ensuring your use of Netchex product meets your individual business and compliance requirements.

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