What is a Health Reimbursement Account (HRA)?

A Health Reimbursement Account (HRA) is defined as a medical reimbursement plan funded by an employer. Employers set up HRAs to reimburse employees for qualified medical expenses. The key characteristic of an HRA is that it is entirely funded by the employer, who has discretion over how much to contribute and what types of expenses can be reimbursed.

Employees benefit from HRAs because they receive tax-free reimbursements for out-of-pocket medical costs. Additionally, HRAs can be designed to carry over unused funds from year to year, providing employees with potential savings for future medical expenses.

The other options describe different financial products or plans but do not accurately represent HRAs. A tax-free savings account for medical expenses typically refers to other types of accounts like Health Savings Accounts (HSAs), which involve contributions from individuals. A fund managed by individuals for their health coverage does not encapsulate the structure and employer-focus of HRAs. Lastly, while HRAs can be a part of consumer-driven health care strategies, they are not themselves classified as a type of consumer-driven health plan; they serve a more specific purpose regarding employer-sponsored coverage and reimbursement.