Health savings accounts and health reimbursement plans have which of the following features?

About Consumer-Driven Health Plans

Consumer-Driven Health Plans (CDHPs) give employers the flexibility to combine a qualifying medical plan with either a health savings account (HSA) or health reimbursement account (HRA).

Cigna's Consumer-Driven Health Plans are designed to deliver savings for clients, without shifting costs to customers. Employers can choose to offer one or both of the Cigna CDHP plans. The health savings account (HSA) gives employees ownership of a tax-exempt savings account they can use to contribute pre-tax dollars to pay for covered health care costs.1The health reimbursement account (HRA) combines a health plan with an employer-funded HRA to help employees pay for covered health care costs.

Typical Plan Structure

With both options, Cigna delivers a one-stop employer and employee experience by integrating administration and any interactions with HSA bank vendors, as well as service and wellness programs.

HRA Plan

• Employer-ownedaccount. The employer chooses limits on remaining HRA dollars that roll over to future plan years.
• Most health plansare eligible. Employers choose the underlying medical plan.
• Contributionsare made by the employer. Employers choose how much to contribute.
• Automatic claim forwardingoption to pay health care providers directly from the HRA.

HSA Plan

• Employee-ownedaccount.
• Qualified high-deductible plansare eligible.Premiumsfor these plans are typically lower than traditional medical plans.
• Contributionscan be made by the employer and the employee, up to the IRS limit each year.
• Preventive prescription drugscan be covered before employees meet their deductible.
• Optional Limited Purpose Flexible Spending Account (FSA)for vision and dental expenses. This gives your employees the freedom to enroll in an HSA while saving additional pre-tax dollars in a FSA to help pay for eligible vision and dental expenses.2

The answer, of course, depends on your needs. But before you can choose, you need to understand the similarities and differences between both types of consumer-directed plans.

Encouraging health care consumerism
Let’s start with the similarities. The philosophies behind the Health Reimbursement Arrangement (HRA) and the Health Savings Account (HSA) are the same – to provide members with affordable health care coverage that gives financial support to help them pay for their health care expenses.

Both are generally offered with deductible-based health plans, which encourage members to become more involved in their own health care decisions by giving them more control over how and when they spend their health care dollars. A member can only contribute to an HSA while enrolled in a high-deductible health plan (HDHP). The minimum deductible amounts for an HSA-eligible HDHP are established by the Treasury department each year. These plans also give members the information and resources they need to help them make informed health care decisions for themselves and their families, while helping lower employers’ costs.

What’s the difference?
One of the most important differences between the two is that the employer owns the HRA and the employee owns the HSA. This means that the employee takes the HSA along when he or she changes jobs. If an employee with an HRA changes or loses his or her job, any remaining amount in an HRA defaults to the employer.

Another significant difference involves how the two types of accounts are funded. The money in an HRA is provided solely by the employer. HRAs are usually unfunded notional accounts, with no cash value. An HSA is a tax-advantaged account that can be used to pay for IRS-defined health care expenses, including long-term care and COBRA premiums. Anyone can contribute to an HSA, including the employer, the employee or a family member. However, there is an annual maximum contribution amount that is established by the U.S. Treasury.

Click here for a chart that compares HRAs and HSAs with each other, as well as with flexible spending accounts (FSAs) and Retiree Reimbursement Accounts (RRAs).

To help you determine which is best for a particular client, here are the specific advantages of each type of fund.

Advantages to plan sponsors

HRA:

• Control over HRA plan design and fund rollover
• Can be integrated with an FSA
• Employee retention tool
• Offers an additional tax-favored benefit

HSA:

• Offer employees a savings vehicle for health-related expenses in retirement
• Employer tax benefit
• Flexibility with account contributions (employer can contribute all, some or none)
• Reduced record-keeping
• Members manage their own HSA funds and become more engaged in their health care behavior and spending
• Lower company expenses through the cost-sharing benefits of a high-deductible health plan

Advantages to members

HRA:

• Asset accumulation
• An HDHP is not required
• Funded entirely by the employer
• Funds are available from the first day of coverage

HSA:

• Asset accumulation
• Tax-free contributions and interest
• Tax-free spending for health care expenses
• Investment with interest
• Long-term savings for major medical or retirement
• Assets are portable
• Payroll-based deductions provide members with a convenient way to fund their accounts

The Aetna HealthFund® family of products includes both HRAs and HSAs. Your broker or Aetna representative can help you determine which is the best option for you. You could also choose to offer both to your employees.

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