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HSA and HRA: The Comparison

Giving consumers more direct control over their health care spending can drive down costs by encouraging people to become smarter health care shoppers. Health reimbursement arrangements (HRAs), health savings accounts (HSAs) and high deductible health plans are all designed to put consumers in charge of how they spend their health care dollars.

  1. High Deductible Health Plan

    • Both an HRA and HSA are designed to work in conjunction with a high deductible health plan, or HDHP. With an HDHP you pay a higher deductible, and that helps keep monthly premiums lower. Employers like HDHP plans because they help keep costs down, and to encourage their use many firms set up HRA accounts for their workers. These HRA accounts are pools of money employees can use to cover the cost of the higher deductible and make the plan more affordable. But while an HSA must be coupled with an HDHP, an HRA can be used with any type of health plan.

    Health Savings Account

    • A health savings account also covers the cost of medical expenses, but individuals can set up this type of plan on their own, without help from their employers. While some companies do offer HSAs to their workers, health savings accounts are also available on the private market. You can set up an HSA through a bank, brokerage firm or mutual fund company, and you can take a tax deduction for the money you put into the account. Any money not used by the end of the year rolls over to the next, allowing you to build a medical savings nest egg over time.

    Health Reimbursement Arrangement

    • A health reimbursement arrangement is set up and funded by the employer to offset part of the costs of medical care throughout the year. The employer typically funds the HRA with a set amount of money for the employee or for the employee and her family. Employees can access this money by submitting claim forms to the insurance company and receive reimbursement for the money they spend on medical care throughout the year.

    Expiration Date

    • If your employer funds an HRA on your behalf, you can use the funds in that account to pay for prescription drugs, medical co-payments, eyeglasses, contact lenses and dental care. If you have money left over at the end of the year, your employer might allow you to roll those funds over, provided you remain enrolled in an eligible high deductible health plan. The rules on HRA rollovers vary from company to company so always check with your HR department for your particular circumstance. It is important to note that the HRA belongs to your employer, and you cannot take that money with you when you leave the firm.

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