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A Look at Personal Health Spending Accounts (PSAs)

HSA v. FSA v. HRA

Planned Administrators, Inc. (PAI), offers a variety of personal health spending accounts (PSAs) to help members pay for qualified medical expenses. We offer health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement arrangements (HRAs) to help our members better navigate their health journeys. 

What is a personal health spending account (PSA)?

A PSA is like a savings account that members can dip into to cover medical needs. Members or their employers put aside money before taxes to pay for healthcare costs that aren’t covered by insurance, like copays and prescriptions. 
For employers, PSAs offer cost control and flexibility. The accounts can be tailored to suit the specific requirements of employees. They empower employees to manage their own costs, promoting financial wellness and even boosting retention.

With our PSA Administration

PAI has an innovative platform that makes it easy for members and employers to navigate account management. 
Our members get features like these:

  • Website
  • Debit card(s), if applicable
  • Mobile app
  • Customer service number 

Health Savings Accounts (HSA)

An HSA works a bit like a checking account, where the employee and employer can contribute up to a maximum amount each year. Often, employees will receive a debit card to use with their HSAs. It’s up to the employee to check in on their contributions, expenses, and reimbursements. 

Employees only qualify for HSAs if they meet these requirements: 

  • Enrolled in a high-deductible health plan (HDHP)
  • Have no other disqualifying health coverage, as determined by the IRS
  • Not enrolled in Medicare
  • Do not qualify as a tax dependent of someone else 

Benefits of an HSA:

  • Tax-free funds 
  • Tax-free withdrawals when money is spent on qualified medical services
  • Penalty-free withdrawals for any purpose after age 65

What’s covered? 

HSAs cover a variety of medical services for employees, including but not limited to: 

  • Office visit copays
  • Deductibles 
  • Dental expenses
  • Vision care
  • Prescriptions
  • Premiums

For a more comprehensive look, view the IRS website.

Flexible Spending Accounts (FSA)

A FSA is an employer-established plan that pays for medical expenses with pretax dollars. Employers and employees can both contribute to the account up to the cap amount each year. Employees have to submit a claim to get reimbursements from their FSA.

What’s covered?

FSAs cover the same qualified medical and dental services as HSAs, apart from Medicare premiums. 

Over-the-Counter (OTC) Medications Eligible for Reimbursements 

In 2019, the CARES Act, a section of the Affordable Care Act, kept FSAs from reimbursing expenses for OTC medical products. But this rule no longer applies.

Now, the law includes reimbursements for OTC products like these:

  • Menstrual products, like tampons and pads
  • Acid controllers, like Tums
  • Acne products, like Neutrogena
  • Painkillers, like Advil or Tylenol

There are many other OTC products that are eligible for reimbursement. For a more comprehensive look, check out the FSA store’s list

Health Reimbursement Arrangements (HRA)

HRAs are employer-funded plans that supplement health insurance benefits and pay for a range of medical fees not covered by insurance. Unlike HSAs and FSAs, employees cannot contribute to their HRA. 

What’s covered?

Like with FSAs, HRA plans only reimburse qualified medical expenses. These reimbursements are often tax-free. Unlike FSAs, though, they can also be used to reduce premiums for employees, retirees, and even COBRA-qualified beneficiaries.

Comparing PSAs

 
Health Savings Account (HSA) 
Flexible Spending Account (FSA) 
Health Reimbursement Arrangement (HRA)
Plan TypesHigh-Deductible Health Plans (HDHP)Traditional health plan HSA-qualified or traditional health plan
Account Ownership Member-ownedEmployer-ownedEmployer-owned
Who Contributes?Member and employerMember and employerEmployer only
Tax-Deductible Contributions? Yes —state, federal, and FICA tax deductible for employers and membersYes —state, federal, and FICA deductible for employers and membersYes — State, federal, and FICA tax deductible for employers only 
Adjust Contribution Amount?AnytimeOnly during open enrollment or qualifying life eventEmployer choice at beginning of plan year 
Do Funds Expire?No, neverYesYes

Which one is the right choice?

It depends on a lot of factors. HSAs, FSAs, and HRAs can be complicated, but understanding the differences is important to choose the right one to fit specific member and employer requests. Reach out to our team for help deciding which of PAI’s personal spending accounts are a good choice for you or your groups. 

Sources: 
https://www.healthequity.com/account-comparison
https://www.paychex.com/articles/employee-benefits/fsa-hsa-hra-plans
 

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