A health reimbursement arrangement (HRA) is funded by:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A health reimbursement arrangement is an employer-funded account used to reimburse employees for qualified medical expenses, including deductibles, copayments, and coinsurance. Employees do not contribute to an HRA through salary reductions; the employer makes all contributions. Unused HRA funds generally may carry over at the employer's discretion, and the amounts are not taxable to the employee when used for qualified expenses. This distinguishes HRAs from FSAs and HSAs, which involve employee contributions, and is covered under the consumer-driven health plan (CDHP) material in AH-III.A.1b.
Why the other options are wrong
- B) Salary-reduction funding describes a flexible spending account (FSA), not an HRA, which is employer-funded.
- C) Employees make no contributions to an HRA, so equal cost-sharing between employer and employee is incorrect.
- D) HRAs are funded by the employer, not by any government premium subsidy program.
Memory hook
HRA = employer money only. If the employee funds it, it is not an HRA.