A MERP (Medical Expense Reimbursement Plan) is actually a type of HRA—but the term is often used to describe a specific strategy rather than a different kind of account.
Both HRAs (Health Reimbursement Arrangements) and MERPs are employer-funded plans that reimburse employees for eligible healthcare expenses. They’re governed by the same IRS rules under Section 105 and are tax-free to employees when used properly.
🧩 So Why Use a Different Term?
The term MERP is usually used when the HRA is being implemented as a deductible-reimbursement strategy—a way for an employer to self-fund part of a higher-deductible group health plan in order to lower premiums.
Here’s how a MERP typically works:
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The employer selects a higher-deductible health plan (to reduce premiums)
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The employer then uses a MERP to reimburse employees for a portion of the deductible (or other out-of-pocket costs)
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Claims are submitted and reimbursed just like with a traditional HRA
Example:
The health plan has a $5,000 deductible. The employer sets up a MERP to reimburse the first $3,000, so the employee effectively experiences only a $2,000 deductible.
🧠Key Differences in Practice:
| Feature | HRA (General Term) | MERP (Strategy-Specific Term) |
|---|---|---|
| Definition | Any employer-funded plan that reimburses medical expenses | A specific type of HRA used to offset high deductibles |
| Common Use | Broad—can reimburse premiums, expenses, or both | Used to self-fund part of a group health deductible |
| Plan Design | Highly customizable | Typically tied to a group plan with defined reimbursements |
| Communication Term | IRS-compliant terminology | Informal industry term to describe a plan strategy |
đź“Ś Bottom Line:
All MERPs are HRAs, but not all HRAs are MERPs.
“MERP” is just a nickname for a popular deductible-reimbursement strategy using HRA rules. It’s a flexible, cost-saving tool that allows employers to share the risk with the insurance carrier—and reduce premiums—without increasing the financial burden on employees.