There are a lot of acronyms when it comes to saving for your health care expenses. HSA, FSA, HRA. Which one should you choose?
Jonathon Hess of Athos Health, our Health Care Hacker, breaks down some of the differences.
HSA - Health Savings Account
- Only available with a high deductible plan
- You make contributions
- Capped by the government
- Tax-free dollars you can use to pay your deductible, co-insurance, co-pay, and any out-of-pocket health care expense
- Can also cover dental and vision
- Cannot be used to pay for your monthly premium
- You can roll over throughout time, meaning you never lose the money
- This is your money, even if you leave your job
- You can invest the money and earn interest on it, like a 401K
- After you turn 65, you can use this money for anything - not just health care expenses
FSA - Flexible Spending Account
- You make contributions
- Tax-free dollars you can use to pay your deductible, co-insurance, co-pay, and any out-of-pocket health care expense
- Can also cover dental and vision
- Cannot be used to pay for your monthly premium
- You can roll over some money year-to-year, but the amount is capped, typically at $500. To some extent, it's "use it or lose it"
- Technically, this is your employer's money. If you leave in the middle of the year, you lose it
HRA - Health Reimbursement Account
- Set up by your employer
- Employer puts money in this account that you can use to buy health care or pay medical expenses
- Tax-free dollars you can use to pay your deductible, co-insurance, co-pay and even your premium
- You cannot set this up or fund it yourself. It has to be your employer
- You can roll over some money year-to-year, but the amount is capped. To some extent, it's "use it or lose it"
- Technically, this is your employer's money. If you leave in the middle of the year, you lose it
So, which one should you choose?
If you have the choice, Hess thinks you should always choose the Health Savings Account (HSA). Some of the key reasons? It's your money, it rolls over so you never lose it, and it doubles as a retirement account.
If you have a question about your health care expenses, send it to us at healthcarehacks@kare11.com. We'll try to address it in the future episode.
