A Health Reimbursement Arrangement (or HRA) is a medical spending program that allows employers to offer tax-exempt funding for employee medical expenses. HRAs are not stand-alone health coverage options, but rather supplement an organization's benefit plan by reimbursing employees for incurred medical expenses not covered by the underlying insurance plan.

Using an HRA provides substantial tax advantages for both employers and employees. Because the employer funds the plan, any reimbursement distributions requested by participating employees are considered tax deductible for your company. Similarly, reimbursement dollars received by the employee are tax-free, so they don’t affect income levels. By offsetting upfront health care costs and providing a non-taxable resource for employers and employees alike, HRAs benefit both the company-at-large as well as each participating individual.