Consumer Directed Health Plans
Health Reimbursement Arrangements and Health Savings Accounts
Consumer directed health plans, whether a Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA) model, eliminate the low co-pay benefit plan and replace them with a high deductible plan design coupled with a savings account that the employee can use to pay for a certain qualified expenses. The primary difference between HRAs and HSAs is who owns the account.
With HRAs the employer agrees to fund an account for each employee who participates in the medical plan. Money from this account may be used for any of the expenses the employer deems to be “qualified.” These might include medical, prescription, dental or even vision expenses. The point is that the employer decides which expenses are eligible and maintains ownership of the accounts.
With HSAs the IRS determines which expenses are eligible, generally those previously mentioned, and the employee, not the employer, owns the account. Both employers and employees may contribute to an HSA account, but any funds which are contributed become immediately vested with the employee and are portable from one job to another.