Can You Use HRA Funds to Pay for Health Insurance Premiums?
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Health insurance premiums are not cheap. If you have access to a Health Reimbursement Arrangement (HRA) through your employer, you may wonder whether you can use those funds to cover your monthly health insurance bill. The answer is yes, but only under certain conditions. The key lies in understanding the type of HRA you have and how it is structured.
While some HRAs allow you to use funds for insurance premiums, others are limited to reimbursing medical expenses like doctor visits or prescriptions.
How Does an HRA Work
An HRA is an employer-funded benefit that reimburses you for eligible healthcare costs. Unlike health savings accounts (HSAs), HRAs are not money sitting in an account you can withdraw from. Instead, you pay out of pocket for a qualifying expense, submit a claim and then get reimbursed tax-free if your expense meets the criteria.
Employers decide how much to contribute annually and which expenses are covered. That may include insurance premiums, but not always. You cannot cash out your HRA, and if you leave your job, those benefits typically do not follow you.
Types of HRAs That Allow Premium Reimbursement
Two types of plans help if you want to use your HRA for insurance premiums.
Individual Coverage HRA (ICHRA)
Introduced in 2020, ICHRAs allow employers of any size to reimburse employees for individual health insurance premiums and other out-of-pocket expenses. The employer decides how much to contribute and can vary the amount based on employee age or family size. As long as the health plan meets Affordable Care Act standards, you are good to go.
Qualified Small Employer HRA (QSEHRA)
This option is for businesses with fewer than 50 full-time workers. With QSEHRAs, employers can reimburse insurance premiums and medical expenses, but within IRS-set annual limits. For 2025, the cap is $6,350 for individuals and $12,800 for families. Employees must be enrolled in a plan that meets minimum essential coverage standards to qualify for reimbursement.
Which Premiums Can Be Reimbursed?
Assuming your HRA allows for premium reimbursement, you may be able to use it for:
• Individual major medical health insurance plans
• Medicare Part A, B, Medicare Advantage, and Supplement plans
• COBRA continuation coverage
• Dental and vision insurance
• Long-term care insurance (within IRS limits)
However, there are exceptions. ICHRAs, for example, cannot reimburse premiums paid through a spouse’s employer plan. Meanwhile, QSEHRAs can, but the reimbursement may be taxable depending on how the spouse’s premiums are paid.
What About Other Medical Expenses?
Beyond premiums, HRAs often cover a broad range of qualified out-of-pocket medical expenses like doctor visits, prescription medications, mental health services, dental and vision care, and over-the-counter items with a doctor’s note.
What You Need to Claim Reimbursements
To get reimbursed, you will need to submit documentation like:
• A receipt or invoice showing the name of the provider, service and date.
• A doctor’s note is required if the service or item requires proof of medical necessity.
• For recurring premiums, a statement showing the monthly amount, provider and frequency.
Once approved, your HRA administrator will issue reimbursement, usually by direct deposit.
What Happens to Unused Funds?
Many HRAs allow unused funds to roll over into the next year, although the employer may cap the amount. However, if you leave your job, the money does not come with you. This is a key difference from HSAs, which are portable.
Final Thoughts
The real advantage of HRAs is their tax efficiency. Reimbursements are tax-free for you and tax-deductible for your employer, which makes this a win-win tool for managing rising healthcare costs.
If you are unsure what kind of HRA you have or what it covers, ask your HR department for the plan documents. Understanding your HRA can help you make smarter decisions about your healthcare spending and maybe even shrink those insurance bills.