Comparing an HSA to an HRA

Should I choose an HSA or an HRA plan?  I’m very new to this insurance stuff.  I want to pay less out of pocket each month but still have good coverage when I need it.

Betwixt and Between

Dear Betwixt and Between,

In order to qualify for a Health Savings Account (HSA), you must enroll in a high deductible health plan.  The high deductible plan would take less out of your paycheck each month, but you would pay for more of your medical services.  You can pay for your deductible, co-pays, and other medical costs from your HSA after you build up your balance.

If you want to pay less out of pocket for medical care, then the HSA plan does not meet your goal.  If you want to pay less for your health insurance, then the HSA plan might suit you.

An HRA plan does not require you to enroll in a particular health plan.  Thus, you could choose a more generous plan and pay less out of pocket for medical care.  The HRA itself is entirely funded by the employer.  The more generous health plan would naturally cost you more to join, but less when you use medical services.

The other factor to consider is how long you will stay with this employer.  The HSA is a portable benefit; the HRA is not.  You own the HSA funds; the employer owns the HRA funds.  You can still use your HSA funds for future medical bills, even if you no longer have the qualified high deductible plan as your coverage.

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.