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HSAs and HRAs – what are they?

savings

Have you ever signed up for health insurance and been confused by the acronyms “HSA” or “HRA”? HSA stands for Health Savings Account, and HRA stands for Health Reimbursement Arrangement. Both of these are programs for employees or individuals to help save money on medical expenses, to include: deductibles, medical equipment not covered in employee health plans, copays, etc.

To qualify for a Health Savings Account (HSA), you have to purchase or already be enrolled in a high-deductible health insurance plan (HDP). An HSA-eligible plan for an individual employee is a plan with an out-of-pocket deductible between $1,300 and $6,550; for a family plan, the deductible has to be between $2,600 and $13,100. An HSA can be established by an employer for their employees, or by individuals who purchase their own health insurance. An HSA is a bank account that is set up under an individual’s name. It is accessed by either a debit card or checks. You determine how much money is deposited, but this amount is capped by government mandate. Money can be deposited by anyone and will accumulate in a tax-advantaged account, until it is spent. This is not a “use it or lose it” type of account—your HSA balance rolls over each year. Money accumulated in the HSA can be spent on any qualified medical, dental, vision, or prescription expenses for any tax dependent, whether they are included on the same health plan or not. An HSA is a great way to save about 25% on all your eligible expenses. Your Avery Hall account executive can help you understand how an HSA may be an excellent option for you.

How is a Health Reimbursement Arrangement (HRA) different? Only an employer on behalf of their employees can establish HRAs. It is an employer-funded program that reimburses employees for certain medical expenses not paid by the company sponsored health insurance plan. An employer is responsible for all the funding that will be available in an employee’s HRA, which is typically an amount less than an employee’s annual health plan deductible. Reimbursements are made after the claims have been processed by the insurance carrier and help the employee with their out-of-pocket expenses. Because an HRA is often paired with a high deductible health plan, the health plan premiums are lower and can justify establishing an HRA. The benefit of enrolling in an HRA is that it allows both employees and employers to save on the cost of health care. Employers interested in setting up an HRA for their staff can work with an Avery Hall account executive.


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