Employee Benefit Plans

Health Savings Accounts (HSA’s) and Health Reimbursement Arrangements (HRA’s)

Health Savings Accounts, or HSA’s, must be paired with a qualified High Deductible Health Plan. Monthly premiums are usually reduced significantly, because an employee must meet a relatively high deductible before insurance coverage begins. The premium savings realized by both the employee and the employer can be used to make pre-tax contributions to the HSA account.

The employee can then withdraw money from his or her HSA account to fund qualified medical expenses. Those include expenses which are not covered by health insurance or are otherwise subject to the plan’s deductible. There is no “use it or lose it” provision — the employee is allowed to roll over any unused HSA account funds into the next year. An HSA (unlike an HRA) is an account owned and managed by the employee. Any funds that the employer chooses to contribute to the HSA account are irrevocable.

A Health Reimbursement Arrangement, or HRA, is an employer-funded and managed account that is most typically paired with a High Deductible Health Plan. This strategy is often very effective because the employer can realize significant premium savings by moving to a higher deductible plan. The employer can then use those savings to fund the HRA account. This fund works to offset the additional exposure that employees face in the higher deductible plan. We have worked with many clients who have made a significant positive impact on the bottom line while not reducing benefits to employees. Unlike the HSA strategy, the HRA offers more flexibility to tailor benefits to the unique needs of the organization.