Health Care Consumerism: HSAs and HRAs

Consumer-directed health plans (CDHPs) typically combine a higher deductible, lower premium health plan with a tax-advantaged account that enrollees can use to pay for health care expenses—most commonly a health savings account or a health reimbursement arrangement.

Enrollees in consumer-directed health plans, whether linked to an HSA or HRA, must keep track of funds in their accounts. If the funds are exhausted before the deductible is met in a given year, enrollees are responsible for paying for the difference out of pocket.

After an enrollee meets the deductible, the plan operates much like a traditional preferred-provider organization (PPO) plan. That is, generally the plan pays for most of the cost of covered services and the enrollee contributes a cost-sharing amount—which varies by plan—until meeting the maximum out-of-pocket spending limit, at which point the plan pays 100 percent of the cost of covered services.

HSAs vs. HRAs: Requirements and Features
Health savings accounts (HSAs)	Health reimbursement arrangements (HRAs)
Plan Design
• HSAs must be linked to a high-deductible health plan (HDHP). For 2011, HSA-linked HDHPs must have an individual deductible of $1,200 or higher, or a family deductible of $2,400 or higher (see "2011 Limits Unchanged for HSAs and High-Deductible Plans"). • In 2011, HSAs have maxiumum total out-of-pocket expenses of $5,950 for single coverage and $11,900 for family coverage. (Also see "For 2012, Higher Limits for HSAs Contributions, Out-of-Pocket Expenses for High-Deductible Plans.")	• HRAs are often coupled with an HDHP but there is no requirement that they must be. • There are no government-set out-of-pocket maximum limits specifically for plans linked to HRAs.
Unspent Funds
• HSA funds are "real dollars" in an employee-owned account. Any unspent funds in an HSA may be rolled over to the next year, thereby reducing or eliminating the enrollee’s share of the deductible in subsequent years.	• An HRA is a notional account controlled by the employer. Most HRAs allow employer-contributed funds to accumulate from year to year; however, this is not required and is at the employer's discretion.
Funding
• HSAs may be funded by employees, by employers, or by both.	• HRAs must be funded solely by employers.
Portability
• HSAs are employee owned and portable.	• An HRA's accumulated funds, on termination of employment, generally revert back to the employer.