Hi my name is Jon. In this episode of
Health Care Care Hacks, spend a little bit of time explaining what the differences are
between HRA, HSA, FSA. Beacuse there's a lot of confusion out there. (music) So let's start with an HSA.
This is a health savings account. You can only have a health savings
account if you have a high deductible plan. But the idea is, you put money into
it, it's capped by the government, it's tax-free dollars that you can then use
to pay for your deductible, your coinsurance, your copay, any out-of-pocket health care expense. There's other expenses like dental and vision which you
can also use your HSA dollars to cover. So that's an HSA, what's an FSA? Well that
is a health care flexible spending account.
These are dollars you set aside,
again tax-free, that you can use to fund any healthcare expense as far as
deductible, coinsurance, copay, or dental, vision, anything it's not covered by
health care. Now one thing you can't use either an HSA or an FSA for, is for your
premium. That has to be paid by a different source. The final one is HRA or a
health reimbursement account. This is probably the least familiar. A health
reimbursement account is set up by your employer, you can't set it up, you can't
fund it. It's money your employer puts in that allows you to pay for some of your
healthcare costs. Now you can use this dollars for premiums, you can do this also
for copay, coinsurance. It's a pool of money that your employer gives to you that
allows you to buy health care or pay for health care services with. Now in many
ways all three accounts are similar, but there's also some key differences that I
want to talk about.
So first off, they're all tax advantaged, and what I mean by
that is they're pre-tax dollars. That means when the money's put in there, you don't
have to pay income tax on it. One big difference is rollover. So for a health
savings account, you can rollover any amount that you have in it throughout
time. That's your account, whereas with an FSA
and an HRA, usually they're capped .The caps are varied, but typically for an FSA
as an example, you cannot roll over more than five hundred dollars. So it's kind
of a use it or lose it with an FSA or HRA. You don't want to over fund them because if
you do, you might lose that money. Another big difference is whose money is it? Well, in an HSA it's your money, it's your family's money, it's your account, no
matter what happens with your employment, no matter what happens to you, that money
is yours.
Whereas with an HRA or an FSA, it's really the employer's
money. So if you leave in the middle of the year, that money's gone. So that's a
really big difference that you have to think about as you make these choices.
The other big thing with HSA is you can invest it. You can invest in a bank earn
interest on it, you can actually use it like a 401k, you can put in the stock market. And you almost can treat it like a retirement account, because when you turn 65, you can use it for anything, you don't have to use it for healthcare dollars. So
if you have the choice, always choose the health savings account. If you have a
question or there's a topic you want us to cover in the future, please email us at
healthcare hacks at kare11.com and we'll try to address it in a future episode.
