HRA or HSA: Which Option Is Better?
If you’re debating between offering a Health Savings Account and Health Reimbursement Account, there are a few key differences you need to know.
Health Savings Account (HSA) paired with a High Deductible Health Plan:
- Financial account funded by the employer, employee or a combination of both
- If an employer determines an amount to contribute, it isn’t a “promise” to pay – the employer needs to fund the account regardless if services are incurred
- Employer or employee can set up banking
- Contributions to the employee’s account by the employer aren’t taxable to the employee
- Once the employer funds the employee’s account, the contribution immediately becomes the possession of the employee
- Contributions made by the employee are taken on a pre-tax basis
- Employees determine when and how to use their account
- Funds must be in the account before it can be used to pay expenses
- The account promotes consumerism as it encourages members to be more involved in their healthcare decisions and how dollars are spent
Health Reimbursement Account (HRA):
- Theoretical account which is the responsibility of the employer
- It's a “promise” to pay or reimburse if certain services are incurred
- If services aren’t incurred, there’s nothing for the employer to reimburse
- Usually paired with a high deductible and high out-of-pocket maximum limit which lowers premium
- Lower premium usually correlates to lower employee contributions toward the cost of coverage
- Funds are available from day one
- Simple to understand and administer the plan
- Plan design with a higher deductible designed for reimbursement by the employer after the deductible is satisfied promotes consumerism
- Employer determines what's to be reimbursed under the health plan (e.g. Deductible? Coinsurance? Copays?)
For more information on which plan might make the best sense for your workforce, contact a member of the ‘A’ Team today.
- Health Savings Accounts: Your Healthcare 401(k)
- HSAs and Voluntary Benefits Go Together Like Peanut Butter & Jelly
- What's the Difference Between a FSA and HSA?
- HSAs Are Here to Stay
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