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Coupling High-Deductible Health Insurance with HSAs, HRAs, or FSAs
Three types of financial arrangements can be coupled with a High-Deductible Health Plan (HDHP) – a Health Savings Account (HSA), a Health Reimbursement Arrangement (HRA) or a Flexible Spending Account (FSA). Read on to learn how pairing a high-deductible health insurance with HSAs, HRAs, or FSAs can work to your advantage.
Each type of the above financial arrangements is unique in its design, administration and use. Combinig a financial arrangement with a HDHP helps employees pay for the health care services they need that are not covered in the HDHP such as co-pays, deductibles, coinsurance, prescriptions, and more, with tax-advantaged funds. HSAs even allow plan members to pay for vision care, long-term care insurance premiums, COBRA premiums and more.
Be sure to weigh the benefits of each before choosing one. Here are a few things to keep in mind about each:
You and/or your employees may contribute to the account.
Your employee owns these funds and can take them from job to job.
These funds roll over annually and earn tax-free interest.
By using a Section 125 Premium Only Plan with HSA Module both the employee and employer save an additional 7.65% in FICA taxes.
This extra 15% in tax savings is forfeited when an employee deducts their HSA savings at year end, on the IRS 1040 Form.
Employees contribute funds through pre-tax payroll deductions.
Any HDHP or PPO plan can accompany this financial arrangement
Normally when coupled with a HDHP the FSA funds don’t rollover unless the Employer chooses the 2.5 month extension of time or the maximum $500 rollover to the next Plan Year.
Funds are not portable but COBRA continuation through the end of the Plan Year may apply for larger groups
Employers own these arrangements, and only employers can contribute to them.
Employer sets the opening balance either lump sum or accumulates monthly and what expenses are reimbursable.
The employer maintains available assets to cover potential expenses.
This type of HRA is designed for 2+ employee groups and new Affordable Care Act regulations generally require that this type of HRA be integrated with an employer sponsored group health plan.
Excepted Benefit HRA Plans that pay for dental, vision, chiropractic, and specific supplemental insurance premium do not require integration with an Employer group health plan.
Funds are not portable but COBRA continuation through the end of the Plan Year may apply for larger groups.
Employers own these arrangements, and only employers can contribute to them.
Employer sets the opening balance either lump sum or accumulates monthly and what expenses are reimbursable.
The employer maintains available assets to cover potential expenses.
The QSE-HRA lets Qualified Small Employers (those with 50 or fewer employees) offer a Health Reimbursement Arrangement (HRA) that uses tax-free dollars to reimburse employees who purchase individual (non-group) health insurance premium on the individual market or the ACA exchange, along with out-of-pocket medical, dental, and vision benefits.
Funds are not portable and COBRA does not apply.
Another form of HRA for employers with just one employee or spouse/employee.
Employers own these arrangements, and only employers can contribute to them.
You set the opening balance and what expenses are reimbursable.
You maintain available assets to cover potential expenses.
The one employee HRA plan is the most Comprehensive HRA Plan design still available after all the Affordable Care Act changes.
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For more information on pairing high-deductible health insurance with HSAs, HRAs, or FSAs, and related topics, please see:
Section 125 Plan with HSA Module for Additional Employer Tax Savings
QSE-HRA Video Released — Plan Documents @ Introductory $199
Section 105 One-Person HRA Plans for the Self-Employed — $199
$129 Flexible Spending Account (FSA) Plan Documents (Section 125)
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