If you find yourself considering health insurance options that include a Health Savings Account (HSA) as well as a Health Reimbursement Account (HRA), you need to understand the differences between these medical savings accounts in order to make the right decision for your circumstances.
A Health Savings Account (HSA) is a medical savings account funded by your own financial contributions and/or an employer’s, and the HSA works in conjunction with a high deductible health plan. A Health Reimbursement Account (HRA) is a medical savings account funded by your employer’s financial contributions and is not limited to high deductible health plans.
Contributions, HSAs have limits while HRAs do not. However, the amount contributed to a HRA is determined by your employer and not you. For HSAs, the 2013 contribution limit is $3,250 for individuals and $6,450 for families.
HRA funds can be used for medical expenses incurred by dependents who are under the age of 27 at the conclusion of the tax year. HSA funds, on the other hand, can be used for dependents through age 24.
Unlike a Health Savings Account, a HRA is not required to be combined with a high-deductible health insurance plan. A HSA can only be used with a high deductible health plan.
Both HSAs and HRAs can roll-over funds remaining at the end of the year. However, for a HRA the roll-over funds may effect how much the employer contributes to the plan in the new year. HSA enrollees can invest unspent funds within interest-bearing financial instruments.
An individual with a HRA does not typically get to keep the funds remaining in a HRA when he or she discontinues employment and leaves the health plan. The funds in a HSA, on the other hand, are owned by the individual and stay with the individual after employment discontinues.
HRAs can be used to pay for a health insurance premium. HSAs cannot be used for traditional health insurance premiums but can be used for Medicare premiums, qualified long-term care insurance, and some other exceptions.
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