Find out if these types of plans are right for you.
Consumer directed health plans are designed to provide a greater level of control over health care dollars. This may help minimize the tax impact and allows for careful tracking of health care spending. These plans are commonly identified by the type of savings accounts associated with them:
- Health Savings Accounts (HSA)
- Health Reimbursement Arrangements (HRA)
- Flexible Spending Accounts (FSA)
Learn more about these three types of plans and the benefits of each below.
High Deductible Health Plan + Health Savings Account (HDHP & HSA)
HDHPs with HSAs are becoming a popular type of consumer directed health plan in Wisconsin. HDHPs offer health insurance coverage featuring a high deductible. These HDHP plans are linked to HSA accounts. With an HSA, you can save money by using pre-taxed dollars to help pay your deductible. You can also pay other qualified out-of-pocket costs with money from your HSA.
Benefits of HSAs
- You can use the funds in the account to pay for your deductible and qualified medical expenses (health care services, prescriptions
- You can use HSA funds to pay medical costs for people listed as a spouse or dependent on your tax return (for qualified expenses)
- The funds you deposit in an HSA aren’t subject to federal income tax at the time of deposit
- You may use the funds for health insurance premiums if they are for long-term care insurance premiums, COBRA, health insurance premiums if you are unemployed, or Medicare or Medigap premiums if you are over 65
- You can earn tax-free interest on your HSA account
- You can accumulate funds from year to year (unlike FSA plans where you have to spend the full amount each year or potentially lose what's left over)
- Additional tax-deductible contributions can be made to your HSA by you or a family member, as long as they do not exceed the legal limit
- You are the owner of your HSA and can continue to use the money in your account for qualified medical expenses
- You can withdraw money from your HSA for things other than qualified medical expenses, however you will be required to pay income tax and a penalty on the amount withdrawn
Health Reimbursement Arrangements (HRAs)
HRA accounts are consumer directed health plans that are set up by your employer. Deposits to the account are made by your employer only. HRAs are designed to reimburse your qualified medical expenses.
Benefits of HRAs
- Unlike an HSA, you don't have to be enrolled in a high deductible health plan to be eligible
- The funds you deposit in an HRA aren’t subject to federal income tax at the time of deposit
- Reimbursements may be made to spouses and dependents of the employee
- You may pay some premiums with the HRA, including health insurance premiums, long-term care insurance premiums, and amounts that are not covered under another health plan
- You can accumulate funds from year to year
- There is no maximum on the amount of money your employer can contribute to your HRA
- Your HRA may be used with some other health benefits provided by your employer
Flexible Spending Arrangements (FSAs)
FSAs are another type of consumer directed health plan your employer sets up for you. With FSAs, the money contributed to your account must be used by the end of the year or you may lose it.
Benefits of FSAs
- You don't have to be enrolled in a high deductible health plan to be eligible for an FSA
- Both you and your employer can contribute
- No employment or federal income taxes are deducted from deposits
- Designed to reimburse your qualified medical expenses within a calendar year
- You must spend the amount you save each year except that some plans allow a grace period of up to 2 ½ months and some plans allow a $500 carry-over
- Your FSA may be used with some other employer-provided health benefits
Need help selecting the right healthcare plan for you? Contact our friendly customer service team today online or by phone at (800) 362-3310.