You have probably heard of an HSA (Health Savings Account), but what about an HRA (Health Reimbursement Account) and how is it better or worse?  The differences are helpful to know when choosing the right plan to maximize benefits and savings.

Understanding Health Reimbursement Accounts (HRA)

A Health Reimbursement Account (HRA) allows an employer to set aside funds to pay for an employee's medical expenses on a tax-free basis. The employer opens, funds and owns this type of account.

The contribution limit is determined by the employer’s plan design. It’s possible for the unused funds to carry over to the next year if written in the employer’s plan design.

Funds from this account reimburse employees for out-of-pocket qualified medical expenses.

An HRA can’t earn interest, won’t reduce health insurance premiums, and can’t be used for retirement income. However, it can reduce the out-of-pocket health care expenses of the account holder.  When the employer sets it up, they can limit what expenses are eligible under the HRA plan.

Health Reimbursement Accounts are sometimes called Health Reimbursement Arrangements.

How it Differs from HSAs (Health Savings Accounts)

An HSA is owned by the employee and opened through their employer. Employers, employees or any third party can contribute to this account tax-free.  

The funds in this account are used to pay for the qualified medical expenses of the account holder, spouse, and/or dependents.

The funds contributed to the account aren't subject to federal income tax at the time of deposit.

So Which is Best for My Family or Business?

Determining which of these tax advantaged accounts is right for you (if any) depends on your budget and medical needs.  Contact your local San Diego Insurance Agent today and make sure you're maximizing your plan and benefits.