Healthcare Showdown…HRA vs. HSA
HRAs are owned by the employer,
HSAs are owned by the individual.
HRAs are employer-sponsored plans. An employer sets allowances for employees who can then use that money to be reimbursed for medical expenses. HSAs, meanwhile, are individual accounts that employers sometimes choose to contribute to. While HSAs are often packaged as “employer benefits,” they are really more like IRAs in that individuals can set them up and contribute to them on their own.
HSAs are actual accounts
When money is put into an HSA, it belongs to the account holder. If an employer contributes to an employee’s HSA, the employee controls that money immediately, even if they leave the company.
When money is added to an HRA, it still belongs to the employer until an actual medical expense is incurred. If an employee leaves a company without spending all the money in the HRA, they lose access to that money.
HSAs don’t cover health insurance premiums
HRAs are designed to act as full health benefits solutions so that employers can pay all or some of the medical expenses of employees. HSAs are meant to cover expenses that fall under the deductible of a health insurance plan. As such, HSA money generally can’t be used to pay for the insurance itself.
HSAs require compatible plans
In order to contribute to an HSA, an individual must have a high-deductible health plan (HDHP). High-deductible plans make a lot of sense for most Americans, so this isn’t a problem, but keep in mind that HRAs don’t have that restriction. Instead, most HRAs only require participants to have minimum essential coverage.