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Health Reimbursement Arrangements (HRA)

Some employers offer their employees a health reimbursement arrangement. Here's what it means for your health insurance and how it works with Covered California.

What is an HRA?

An HRA is an employer-funded health benefit that provides tax-free reimbursement for qualified medical expenses, up to a set dollar amount per year. Qualified expenses can include:

  • Out-of-pocket costs, like and

HRAs are different from traditional health insurance through a job. Some employers offer an HRA instead of traditional group health insurance. You use HRA funds to buy your own health insurance on the individual insurance market, including through Covered California.

How HRAs Affect Your Insurance and Financial Help

With an HRA, you choose your own health plan on the individual market, like a plan through Covered California, instead of enrolling in your employer’s plan.

Whether you can get financial help to lower your monthly premium payment depends on if your HRA offer is considered affordable by federal standards. Use the HRA Affordability Calculator to find out.

If your HRA is considered:

  • Affordable: You won't qualify for financial help.
  • Unaffordable: You may qualify for financial help depending on your income and other factors.

Types of HRAs

The two most common types of HRAs are the Individual Coverage Health Reimbursement Arrangement (ICHRA) and the Qualified Small Employer Health Reimbursement Arrangement (QSEHR). Both can be used to buy a health plan through Covered California.

For ICHRA:

  • You aren’t allowed a premium tax credit unless the ICHRA is unaffordable and you opt out of the ICHRA.

For QSEHRA:

  • If the QSEHRA is affordable, no premium tax credit is allowed.
  • If the QSEHRA is unaffordable, you can still qualify for premium tax credits, but the credit must generally be reduced by the monthly QSEHRA benefit.
HRA Type
HRA Type
Eligibility
Advantages
Column 3
ICHRA
Employers set eligibility rules
Reimbursements are tax-free Employees can shop for plans that work for them
Can affect ability to receive premium subsidies
QSEHRA
Must include all full-time employees
Works with other group plans Can use funds for premiums and qualified medical expenses
Caps on reimbursement amount Must maintain minimum essential coverage to get premium subsidies

Your HRA Offer Letter

In most cases, your employer must give you a written notice at least 90 days before the HRA plan year starts. This is called an HRA offer letter. Keep it with your other important documents. You will need it to determine if your HRA is affordable and to enroll in individual health insurance.

How to Enroll in an HRA

  • Check if your HRA is affordable.

    Use the HRA Affordability Calculator to find out if your HRA qualifies you for financial help through Covered California.

  • Choose your enrollment path.

    • If you haven’t enrolled in Covered California yet:
    • If your HRA starts on Jan. 1, you can enroll in Covered California during the open-enrollment period between Nov. 1 and Jan. 31. For insurance to start on Jan. 1, enroll by Dec. 31.
    • If you gain access to an HRA at another time of year, you may qualify for a special-enrollment period to enroll in or change your insurance.

    If you’re already enrolled in Covered California, you don’t need to change your plan. Use the HRA Affordability Calculator to confirm whether your financial help needs to be updated.

  • Enroll in a health plan.

    Choose and enroll in a plan. If you qualify for financial help, apply it to lower your monthly premium.