What Is HRA
A Health Reimbursement Arrangement (HRA) is an employer-funded account that pays back employees for eligible medical expenses, including deductibles, copays, coinsurance, and sometimes health insurance premiums. Unlike HSAs or FSAs, HRAs are fully employer-owned. The employer decides the contribution amount each year, what expenses qualify for reimbursement, and whether unused funds roll over to the next year.
How HRA Affects Your Denied Claims
When your insurance claim gets denied, your HRA becomes relevant in specific ways. First, if your claim denial relates to a deductible or coinsurance amount you still owe, you can use HRA funds to cover that out-of-pocket cost. However, the HRA itself cannot override your insurance company's denial decision. If your claim was denied for lack of medical necessity, prior authorization issues, or being deemed experimental, the HRA can only reimburse you after you've resolved the denial through appeals.
Some employers offer integrated HRA plans that work with specific insurance carriers. These plans may have coordinated appeal processes where the HRA administrator and your health plan work together. You should check your HRA plan documents to see if your employer's arrangement includes this coordination.
Using HRA Funds During an Appeal
- Internal appeals: If you file an internal appeal with your insurance company after a denial, you can use HRA funds to pay the cost of the service while waiting for the appeal decision. You'll be reimbursed from the HRA once the appeal concludes favorably.
- External appeals: Most states allow external appeals for denials based on medical necessity (typically called Independent External Review or IER). Your HRA can cover these out-of-pocket costs as well. Under the Affordable Care Act, state-regulated plans must allow external appeals if the denial involves a medical judgment decision.
- Prior authorization issues: If your claim was denied because prior authorization wasn't obtained, your HRA can cover the service cost while you work with your doctor's office to file a retrospective authorization request with your insurance company.
Important Limitations
- HRA funds are tied to your employment. If you leave the company, you typically lose access to unused HRA balances, unlike HSAs which are portable. Some employers offer COBRA continuation, which extends HRA access for up to 18 months after termination.
- HRA reimbursements are taxable to you as income if the plan is not set up as a "qualified health plan" under IRS regulations. Ask your HR department whether your HRA qualifies.
- The employer controls what counts as an eligible expense. Some HRAs exclude certain mental health services, dental, or vision care. Review your plan's Summary Plan Description to confirm coverage.
- HRAs cannot be used to pay insurance premiums if you're unemployed and on COBRA, with narrow exceptions for retirees.
Common Questions
Can I use my HRA balance to pay my insurance deductible before filing a claim?
Yes. You can request reimbursement from your HRA for deductible amounts you've paid out-of-pocket. However, some HRA plans require you to submit a claim to your insurance first and receive an Explanation of Benefits (EOB) showing the deductible applied before the HRA will reimburse you. Check with your HRA administrator about their documentation requirements.
If my insurance company denies a claim for lack of prior authorization, can my HRA override that?
No. Your HRA cannot force your insurance company to approve a denied claim. What it can do is reimburse you for the service cost while you pursue a retrospective authorization or file an appeal. The HRA is a reimbursement tool, not an appeal mechanism.
What happens to my HRA balance if I'm laid off?
This depends on your employer's plan. Most HRAs are forfeited upon termination, though you may continue access through COBRA. Some employers offer a "grace period" to use the balance. Review your Summary Plan Description or contact HR before leaving your job to understand your rights to remaining HRA funds.
Related Concepts
HSA and FSA are similar account types that work differently. HSAs are portable and belong to you; FSAs are employer-owned like HRAs but have stricter "use it or lose it" rules. Understanding all three helps you maximize your health benefits during the claims and appeals process.