Consumer Driven Health Plans
HRA (Health Reimbursement Accounts) & HSA (Health Savings Accounts) are the newest healthcare plans to enter the marketplace.
HRA & HSA health plans allow employers and employees to set aside tax free monies to pay for health expenses. They differ in structure but the main goal is to allow premium savings for the employer and tax savings and more control over their healthcare for the employees.
HRA plans are totally "employer funded". Typically an employer will establish a high deductible health plan such as $1,000. The employer will then set aside a defined amount to contribute to each employees healthcare account When medical expenses are incurred prior to reaching the deductible, employees use the money in their account to pay for the expenses. Once an employee has reached their deductible, the health plan pays most expenses for the remainder of the calendar year. The advantages for the employer are the funds are tax deductible and any unused amounts in the employees account can be rolled over into the next year. In addition, by establishing a high deductible health plan, medical premiums are usually reduced. By having a high deductible, employees are encouraged to be better consumers of their healthcare dollars and usually have lower costs because of the lower premiums and employer contributions. If the employee terminates, any unused monies remain with the employer.
HSA plans are usually both "employer and employee funded." HSA plans require a high deductible health plan in order to qualify for tax savings. HSA plans work much like the HRA in that the employer and employee contribute money to the healthcare account. Until the deductible is reached, all medical expenses are paid from this account. Unlike an HRA though, if an employee terminates, they are allowed to keep their monies in the health account. Money can we withdrawn from the account for expenses other than medical. If money is withdrawn for non-medical expenses, then the employee must pay tax on that money. Money left over at the end of each year may be carried over into the next year. Like the HRA, significant premium reductions can be achieved by utilizing the high deductible coverage.
We included a chart below that will show you the differences between the plans. If you'd like more information on how to set up these plans or how to use them, please call our office and we'll be glad to go over them in detail
HRA vs. FSAs vs. HSAs
Health Reimbursement Accounts (HRAs)
• must be entirely funded by the employer
• annual deposits are limited by plan design
• typically includes reimbursement for medical expenses only, but may include
reimbursement for vision and dental expenses
• may or may not have a roll over
• claims may be paid in advance like Flex, or may be paid as deposits are made
• claims are tax deductible to the employer and tax free to the employee
• unclaimed monies revert to the employer
• where a roll over is included, unused amounts rolled over are an accrued
liability
• the plan is responsible for full claims substantiation before reimbursement
Flexible Spending Accounts (FSAs)
• may he funded either by the employer, the employee, or both
• annual deposits are limited by plan design
• typically includes reimbursement for medical, vision and dental expenses
• also allows reimbursement for work related child care
• does not have a rollover provision
• claims for health care expenses must be available up to the full annual
election
throughout the entire year
• unclaimed monies revert to the employer
• claims are tax deductible to the employer and tax free to the employee
• the plan is responsible for full claims substantiation before reimbursement
Health Savings Accounts (HSAs)
• may only he offered in conjunction with a special high deductible medical
insurance plan with no first dollar coverage (i.e. Dr Office Visit or Rx Card)
• deposits to HSA may equal the deductible amount plus co-insurance to a
maximum of $2,600 per single and $5,150 per family
• may reimburse for medical, vision, and dental expenses
• has a rollover provision
• claims may be reimbursed as periodic deposits are made
• deposits are tax deductible to the employer and tax free to the employee
• the participant is responsible for full claims substantiation if personally
audited by
the IRS