Health Savings Accounts versus Health Reimbursement Accounts
With the concept of "consumer-driven" health care gaining in popularity, numerous
vehicles are available to help fund health care costs.
Health Savings Accounts (HSA) are medical savings accounts available to indviduals
who have in place a high-deductible health plan. Funds contributed to an HSA (either
by the owner of the account, his or her employer, or a third-party) are not subject
to income tax; these funds can only be used to pay for qualified medical expenses.
Unused funds can be rolled over each year and are owned by the employee.
Health Reimbursement Accounts or Arrangements (HRA) are employer-funded accounts
used to pay medical expenses after the employer "cap" is reached. HRAs resemble
traditional medical insurance plans. HRAs do not have a savings component to them.
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