In order to establish a Health Reimbursement Arrangement (HRA), it MUST:
A. be offered in conjunction with other employer provided health benefits
B. limit the benefits to prescription drugs only
C. be established by the employer
D. limit the amount of money the employee can contribute toward the account
The Correct Answer and Explanation is:
The correct answer is C. be established by the employer.
Explanation:
A Health Reimbursement Arrangement (HRA) is a type of employer-funded health benefit plan that allows employers to reimburse employees for incurred medical expenses and, in some cases, health insurance premiums. The establishment and maintenance of an HRA is entirely dependent on the employer, as they set up the plan according to their financial capabilities and employee needs.
Key Features of HRAs:
- Employer-Funded: HRAs are funded solely by the employer; employees do not contribute their own money to the account. This characteristic distinguishes HRAs from Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs), which may allow employee contributions.
- Reimbursement Model: The employer defines which medical expenses are reimbursable, which can include a wide range of healthcare costs such as deductibles, copayments, and some premium payments. This flexibility allows employers to customize the arrangement to meet their workforce’s needs.
- Integration with Other Benefits: While an HRA can be offered alongside other health benefits, it is not a requirement. It can be designed to work in conjunction with a group health plan or as a standalone benefit for employees, but the establishment of the HRA itself is what is fundamentally essential.
- No Limits on Employee Contributions: Unlike other accounts, HRAs do not have employee contribution limits since employees cannot contribute to them. The employer decides how much funding is allocated annually.
- Compliance with Regulations: HRAs must comply with specific federal regulations, including the Affordable Care Act (ACA), but the fundamental requirement is that they are established and funded by the employer.
In conclusion, for an HRA to exist, it must be established by the employer, as this is a defining characteristic of the arrangement, providing employees with the ability to receive reimbursements for their medical expenses.