FSA, HSA, HRA: Choosing the right health savings account for your business

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One way you can support your employees’ whole health is to make sure they have the right resources to take care of their financial health.

With various health insurance savings accounts, your employees can take charge of their finances. These pre-tax accounts can help your employees proactively budget and plan for upcoming costs, which makes them smarter health care consumers.

Let’s take a look at some of the options:

Types of health insurance savings accounts

Health care flexible spending account (FSA)

This pre-tax benefit FSA account can be used to pay for eligible medical, dental and vision expenses that aren’t covered by insurance. After employees determine how much to contribute to their FSA, they can access the full amount of their account on day one of their plan year and funds are automatically deducted pre-tax. It's important for employees to think through how much they are contributing, because some FSAs don’t allow funds to be carried over year to year. The IRS sets limits on how much employees can contribute to their FSA each year.

Health savings account (HSA)

Used in conjunction with a high-deductible health plan (HDHP), an HSA is a pre-tax benefit account that can be used to pay for eligible out-of-pocket medical, dental and vision expenses. The employee determines how much they want to contribute annually — within the limit set by the IRS — and if money remains in their account at the end of the plan year, it will automatically carry over. Any balance in an HSA follows the employee, regardless of changes in employment, insurance carrier or retirement.

Health reimbursement arrangement (HRA)

This employer-sponsored benefit account acts like a health care spending allowance. An HRA is a reimbursement account that allows employees to pay for eligible out-of-pocket expenses like coinsurance, deductibles and pharmacy costs up to a set amount.

Dependent care flexible spending account (DCFSA)

A dependent care flexible spending account is a pre-tax benefit account that can be used to pay for eligible expenses like preschool, summer day camp, before-or-after school programs and child or adult daycare. Employees can determine how much they want to contribute and choose their preference for payment and reimbursement. Much like an FSA, there are limits to how much an employee can contribute to a DCFSA and the funds must be used within a certain time period.

Choosing the right savings accounts for your workforce

While each type of funding account has its benefits, it's important to know which one or combination will best serve your unique workforce. FSA, HSA, HRA and other health care accounts are a great way to engage your employees in their health and the financial aspects of health care. By offering them options, your employees can feel empowered to take control and make the most of their spending.

Because HSAs and FSAs are two of the most commonly offered — and often confused — health savings accounts, understanding how they differ is an important step in choosing the right option for your workforce.

HSA vs. FSA: key differences

While HSAs and FSAs are similar in the types of expenses they cover, there are many key differences between them.

• Health plan types: Employees can usually pair an FSA with any health plan type. HSAs are only available to employees enrolled in a high-deductible health plan.
• Ability to invest funds: HSA funds can be invested, FSA funds cannot.
• Funds carry-over: Employees must use all FSA funds each year as they do not carry over. Funds contributed to an HSA can be carried-over from year to year — HSA funds also stay with the employee even if they change jobs or retire.
• Contribution limits: HSAs often have higher contribution limits than FSAs.

Employees should consider their health needs, financial goals and anticipated medical expenses when choosing which account to open.

Empower smarter coverage choices for your employees

Our easy-to-use tools, including our secure member site, myWellmark^®, make it simple for your employees to make cost-conscious coverage decisions.

myWellmark gives employees a two-year view of their health plan usage to determine if they are paying for more coverage than they need. They can compare current costs with other options to choose the most cost-effective plan during enrollment or after a qualifying life event.

Questions? Contact your authorized Wellmark account representative, or email us at blueatwork@Wellmark.com.