These plans include an account that helps members pay their out-of-pocket costs on a pre-tax basis. The account can either be a health savings account (HSA) or a health reimbursement account (HRA).
HRAs and HSAs are similar in many ways:
They are both a type of medical savings account.
The medical benefit includes a deductible. Members typically use their HSA or HRA to pay out-of-pocket expenses until they meet the deductible or after they meet the deductible. The benefit plans include an out-of-pocket maximum and, once met, they pay 100% of covered services, including pharmacy.
They cover routine preventive care under the basic medical benefit. These services are not subject to the deductible.
HRAs and HSAs differ in that:
Employers most often fund HRAs.
Employees most often fund HSAs.
With HSAs, if members do not have sufficient funds in their account, or choose to save those funds for a later date, they pay any remaining cost-share out-of-pocket. The HSA belongs to the account holder even if they change employers. The Internal Revenue Service allows annual deposits that can equal the benefit plan’s deductible.