An HCA account, short for health care account, is an employer-funded health reimbursement arrangement (HRA) that pays you back on a tax-free basis for out-of-pocket medical expenses. Your employer sets up the account, decides how much money is available each year, and owns the balance. You submit claims for eligible expenses and receive reimbursement up to the limit your employer sets.
How an HCA Works
The mechanics are straightforward once you know who controls what. Your employer puts money into the arrangement. Nothing comes out of your paycheck.1HealthCare.gov. Health Reimbursement Arrangements – 3 Things to Know When you have a qualified medical expense, you file a claim with the plan administrator and get paid back, typically by direct deposit or check.
The employer, not you, owns the account. That ownership shapes almost every other rule. The company decides which expenses are covered, how much is available each year, and whether an unused balance rolls over. You have no vested right to the money. Your employer is also never permitted to hand you the unused balance as cash; it can only be used for future reimbursement of qualified medical expenses.2Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
Reimbursements are tax-free. Employer contributions are excluded from your gross income under federal tax law, and you owe no Social Security or Medicare tax on them either.3Office of the Law Revision Counsel. 26 USC 106 – Contributions by Employer to Accident and Health Plans You will see the value of employer-sponsored health coverage, HRA contributions included, reported in Box 12 of your W-2 under Code DD. That figure is informational only. It does not raise your taxable income.4Internal Revenue Service. Form W-2 Reporting of Employer-Sponsored Health Coverage
What You Can Get Reimbursed For
An HCA can cover any expense that qualifies as medical care under the tax code, though your specific plan may use a narrower list. IRS Publication 502 is the master reference. Common eligible costs include:
- Deductibles, copays, and coinsurance under your health plan
- Prescription drugs, including insulin
- Dental care such as cleanings, fillings, braces, extractions, dentures, and X-rays5Internal Revenue Service. Publication 502 – Medical and Dental Expenses
- Vision care, including exams, prescription glasses, contacts, and laser eye surgery5Internal Revenue Service. Publication 502 – Medical and Dental Expenses
- Mental health visits, therapy, and substance abuse treatment
Cosmetic procedures, gym memberships, and non-prescribed over-the-counter supplements generally do not qualify. Because your employer may exclude some IRS-eligible expenses or focus reimbursement on specific categories, check your plan’s summary plan description before assuming an expense is covered.
How To File a Claim and Get Paid Back
Start with documentation. For most in-network care, the explanation of benefits (EOB) from your insurer is the strongest evidence of what you paid. For expenses that never touched your insurance, use an itemized receipt from the provider. Whichever you use, it should show the date of service, provider name, description of the treatment, and the amount charged.
Most administrators run an online portal or mobile app for uploading claim forms and receipts. Paper submission by mail is still available under most plans. Keep copies of anything you send.
The plan administrator has 30 calendar days to decide a post-service claim after receiving it, with one 15-day extension allowed if the plan notifies you in writing and explains the delay.6U.S. Department of Labor. Filing a Claim for Your Health Benefits Many administrators move faster, but that ceiling tells you when to follow up.
If a claim is denied, the administrator must send a written explanation that identifies the specific reason, the plan provision behind it, and how to appeal. You have at least 180 days to file that appeal, and the plan must decide it within 30 days for a post-service claim.7U.S. Department of Labor. Benefit Claims Procedure Regulation FAQs Most denials come down to an ineligible expense, incomplete documentation, or a missed deadline, so review those first before appealing.
The Different Kinds of HRAs Your Employer May Call an HCA
Federal rules recognize several HRA varieties, and the “HCA” label at your workplace probably refers to one of them. The type matters because it determines eligibility, contribution caps, and what other coverage you need.
- Integrated (traditional) HRA. Paired with a group health plan from the same employer, with no federal cap on contributions. Common at large employers and typically used to reimburse deductibles, copays, and coinsurance.8Centers for Medicare and Medicaid Services. Health Reimbursement Arrangements Overview
- Individual coverage HRA (ICHRA). Available at employers of any size. Instead of offering a group plan, the employer reimburses employees who buy their own individual coverage or enroll in Medicare. No federal contribution cap.9HealthCare.gov. Individual Coverage Health Reimbursement Arrangements
- Qualified small employer HRA (QSEHRA). Only for employers with fewer than 50 full-time employees that do not offer a group plan. Employees must carry minimum essential coverage. The IRS sets annual caps: for 2026, $6,450 for self-only and $13,100 for family coverage.8Centers for Medicare and Medicaid Services. Health Reimbursement Arrangements Overview
- Excepted benefit HRA. Offered alongside a traditional group plan and capped at $2,200 in 2026. Usable for expenses like dental and vision even if you decline the primary group plan.
Your plan documents or benefits administrator can confirm which type you have.
What Happens to the Money
Carryover depends on your employer’s plan design. Some plans roll unused balances forward in full, some cap the rollover, and some let it lapse at year-end. Even if the balance carries over, most plans set a run-out period after the plan year ends during which you can still submit claims for expenses from that year. Run-out periods commonly range from 30 to 90 days. No federal rule sets a minimum, so the exact deadline lives in your summary plan description.
Leaving your job usually ends your access. Because an HRA is a group health plan, though, it falls under COBRA continuation coverage. A qualifying event such as termination or a reduction in hours can let you elect COBRA to keep submitting claims, typically for up to 18 months, with COBRA premiums applying.
How an HCA Interacts With HSAs and FSAs
A general-purpose HRA counts as disqualifying coverage for a health savings account. To contribute to an HSA, you must be enrolled in a high-deductible health plan and have no other health plan that pays medical expenses before the deductible is met. A standard HRA pays from the first dollar, which knocks out HSA eligibility.10Internal Revenue Service. Expanded Availability of Health Savings Accounts Under the One, Big, Beautiful Bill Act Employers who want employees to keep HSA eligibility have to limit the HRA to premiums, preventive care, or expenses above the HDHP deductible.
If your employer offers both an HRA and a health FSA covering the same expenses, the plan documents set the payment order. The default is HRA first, then FSA, though some employers reverse it so FSA dollars, which are use-it-or-lose-it, get spent down first.
Who Cannot Participate
Self-employed people cannot use an HRA. The federal tax exclusion applies only to employees, so sole proprietors, partners in a partnership, and 2-percent shareholder-employees of an S corporation are all shut out. The IRS specifically treats 2-percent S-corp owners as self-employed for health-plan purposes and excludes them from both HRAs and QSEHRAs.11Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues