Health Reimbursement Arrangements
Health reimbursement arrangement plans are health and medical reimbursement plans compensated by your employer. Health reimbursement arrangement plans are tax-advantaged and both the employers and the employees can spend less for healthcare thanks to this. For health reimbursement arrangements, the plan must be compensated by the employer it cannot be funded by salary reduction. The plan can also provide benefits for substantiated medical expenses only. Some of the benefits are co-payments, co-insurance, prescription drugs, over the counter medicines, out of pocket medical expenses, dental and vision expenses and premiums. Health reimbursement arrangements can be either a separate benefits account or it can be with a Health Care Flexible Spending Account (FSA), though you cannot get two reimbursements for the same thing or the same expense. Also, any unused funds you acquire from your health reimbursement arrangement can be used for future purposes depending on how your plan works. As for how much will be contributed to your health reimbursement arrangement, it will depend on your employer’s plan document.
The Rules for Health Reimbursement Arrangements:
• Favorable tax treatment: Coverage under a health reimbursement arrangement and expenses reimbursed through it will not be taken from the covered individual’s gross income. With FSAs, however, an individual cannot have an income tax deduction for an expense that was covered by their health reimbursement arrangement.
• Solely an employer-paid benefit: Payment for the benefit cannot be taken from the employee’s salary; it can only be paid for by the employer’s money.
• Reimbursement for medical expenses only: The reimbursements of the plan cannot be used for non-medical purposes. It can only be used for medical expenses as long as the individual shows proof.
• Carry-over of unused coverage: As explained above, individuals can use unused coverage for future purposes. Any unused amount will be added to the coverage the individual needs or gets in the future. However, the unused coverage cannot be received as cash either directly or non-directly.
• Retirees may be covered: Health reimbursement arrangements can cover former employees and the spouse and dependents of their former employees.
• Coordination with major medical plan: Health reimbursement arrangements can be offered with the employer’s primary group health plan. The employer may offer a high-deductible major medical plan along with coverage under the health reimbursement arrangement.
• Salary reduction may not be “linked” to the health reimbursement arrangement: In case of accidents and the like, the salary reduction money that would pay for the expenses can not be attributed to the health reimbursement arrangement.
• Coordination with flexible spending accounts
• COBRA: A health reimbursement arrangement is considered a “group health plan” for purposes of health care continuation coverage requirements under COBRA.
• Non-discrimination rules apply: Health reimbursement arrangements can not be offered to only high-paid executives.