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HSA, HRA, or FSA: Which Plan is right for your clients?

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While most brokers understand the difference between HSAs, HRAs, and FSAs, how do you know which one is right for your clients? There are pros can cons of each, and different approaches can be more beneficial to some employers based on their goals and needs. In this article, we breakdown what you need to know. 

 
Health Savings Account (HSA)

Employers who are seeking to minimize the cost of providing health benefits by offering a high-deductible health plan (HDHP) will generally offer an HSA. Since compliance requires less paperwork, they can often save on administrative costs. HSAs offer employees a broader value proposition: the ability to pay for current or future expenses without fear of forfeiting dollars, triple tax advantage, and investment growth potential. 

Health Reimbursement Arrangement (HRA)

An HRA can be a good first step to encouraging employees to take a consumer-driven approach to their
own healthcare. An HRA is a fund set up by the employer. The employer sets aside a certain amount of money each year for employees to use for medical expenses not covered by their health plan, such as deductibles or coinsurance. Only the employer can put money into the HRA. They may be designed in many fashions to suit the specific needs of the employer and employees. It is one of the most flexible types of employee benefits plans, making it very attractive to most employers.

Flexible Spending Account (FSA)

FSAs do not require participation in an HDHP, so they are most frequently offered in conjunction with
traditional health plans. Traditional health plans limit out-of-pocket expenses for participants making it
easier for an employee to estimate annual medical expenses by calculating projected copays, deductible
amounts, coinsurance, etc. FSAs truly are a “spending” account, in that participants are expected to spend the funds by the end oft he plan year, though certain plans may have features that allow for added flexibility.

   

67% of organizations offer HSA incentives to increase employee engagement, such as first dollar matching or seeding money*

 

Pre-tax Accounts

In addition to the above account, you can also offer these pre-tax accounts to help your clients save money. 

Limited Purpose FSA (LPFSA)

An LPFSA is offered with an HSA and pays for eligible vision and dental expenses only. Like a health FSA, the full annual election is immediately available to the employee on day one of the plan year, even though funds have not yet been withdrawn from future paychecks. 

Dependent Care Account (DCA)

A DCA lets employees use pre-tax dollars to pay for eligible expenses related to care for a child, disabled spouse, elderly parent, or other dependent who is physically or mentally incapable of self-care, so the employee can work, or if married, for a spouse to work, look for work, or attend school full time.

Commuter Benefits

A commuter account is an employer-sponsored benefit program that allows employees to set aside pre-tax funds in separate accounts to pay for qualified mass transit and parking expenses associated with their commute to work.

 

To learn more about how to streamline the user experience and harness the power of technology to keep employees using their accounts correctly, check out BCC's SmartCare platform here

 

 

*Aite Health Benefit Accounts Market Forecast (September 2019)