What is a High Deductible Health Insurance Plan?

HSAA high deductible health insurance plan (HDHP) requires insured patients to pay significant sums before insurance kicks in. These plans must, by Federal law, feature higher deductibles than typical plans, and must cap a patient's out-of-pocket costs.

Health Savings Accounts (HSAs)

HDHP policyholders can open special tax-favored Health Savings Accounts (HSAs), under which they can divert pretax income to pay for medical care. Because HSAs offer special tax advantages, the IRS restricts how patients can use the money. HSA funds can only be used for specific medical expenses listed in IRS Publication 502, Medical and Dental Expenses. Money not spent on qualified medical expenses is subject to taxes and penalties.

Health Reimbursement Arrangements (HRAs)

This cost-saving plan is similar to an HSA, but HRA funds are held by the employer for disbursement to employees to pay medical expenses. Contributions to HRA funds are tax-deductible to the employer, and remain with the employer when the employee leaves the workplace. HRAs are not limited to use with HDPs, but can be used with any standard health insurance plan.

How Do HRAs Benefit Employers?

More control over management of benefit plan costs
Answer to escalating health care costs
Favorable plan design options
No advance payments to employees
Total control over reimbursement amounts
Great benefit at a low cost
Tax deductions for reimbursements
Help attract and retain good employees
Soften impact of higher deductibles to employees

How Do HRAs Benefit Employees?

100% employer funded
Provide employees with choice
Provide patient direct features
Tax free reimbursement for substantiated medical expenses
Allow for carryover of unused money
Easy to understand and utilize