One of the newest insurance products is something known as an HRA or Health Reimbursement Arrangement. If you haven’t heard about this latest innovation in health insurance, you might want to take a moment and learn more.
On the surface, an HRA looks like an HSA or Health Savings Account. The both are tied to a savings account and a high deductible health insurance product. Contributions and withdrawals for approved health related expenses are tax deductible. Some key differences will immediately identify where the two plans diverge:
1) The HRA plan is not available as an individual insurance product.
2) The employee may not contribute into the savings account. All contributions are done by the employer.
3) The amounts in the savings account will be forfeited if you lose your job. You may request reimbursement for any expenses that were incurred but not tendered during the term that coverage was in place.
4) Your HRA account is not eligible to receive interest.
For more information, check out IRS HRA Information.
If health insurance costs are getting you down, a health savings account may be a more attractive option.
What’s a health savings account? A health savings account or HSA is a high deductible plan tied to a medical spending account.
Those familiar with cafeteria plans from group insurance may be thinking this is similar to a flexible spending account. To some extent, it is. Where an FSA and an HSA are similar is that you allocate money beforehand to pay medical expenses that are subject to coinsurance, deductible or copays. There are tax advantages as well that are applicable for both.
What’s different? Well, for one, the money you put in an FSA must be used by a given date or Uncle Sam gets whatever you didn’t use. The money placed in an HSA does not have an expiration date. What that means is that you can fund your account and, if you have a good health year, the money stays in your account ready to be used when you need it. Also, many insurers place your funds in interest bearing accounts. Great news is that the money you put in is tax deductible and the interest is tax deferred! Contact a tax professional to discuss the federal HSA limits on what is tax deductible.
Some of the most notable features of an HSA are:
- Money placed in the HSA account are tax exempt.
- Interest earned on the money is tax deferred.
- You are protected for large catastrophic events.
- You decide the deductible and coinsurance options that work for you.
- You control your health care expenses.
- You don’t pay for premium for coverage that you may not use in a year. That’s a savings each and every month!
If you would like to take a look at how much you can save with an HSA option, contact us at
vonfabian.com.
If you would like to see more information about HSA’s in general, go to U.S. Treasury HSA Information