By: Suzanne Berman, MD, FAAP & Angelo Peter Giardino, MD, PhD, FAAP
There are three different types of healthcare-related savings plans you might use for your family: HSAs, FSAs, and HRAs. These accounts might either be paired with your health insurance or used separately from it. All three are generally reserved for medical costs, but they each have unique rules and regulations.
Common Types of Health Savings Plans:
Flexible spending account (FSA). A reimbursement plan (including a Health Flexible Spending Account or Dependent Care Assistance Program) that allows you to choose a fixed dollar amount to be withheld (tax free) from your salary. You can use your FSA to pay for things like medications, eyeglasses, and copays. Any leftover money over $500 at the end of the year is forfeited (i.e. "use it or lose it.") The FSA does not have to be paired with a particular insurance plan.
Health savings account (HSA). A fixed dollar amount is withheld from your paycheck, and/or your employer contributes an amount. A HSA must be paired with a high-deductible insurance plan (over $1300 for an individual or over $2600 for a family, in 2017). HSA owners may be covered only by the high-deductible health insurance plan and no other significant health insurance. Unlike a FSA, a family can save or "roll over" unused HSA money from year to year and even earn interest on it.
Health reimbursement account (HRA). In this plan, your employer reimburses you directly (up to a specified maximum amount per year) when you are billed for approved medical expenses. If your HRA is paired with your insurance, it can only be used on expenses sent to that health insurance policy provider. For example, if you have an individual HSA for your own high deductible health plan, but your child is covered by another plan, you cannot use your HSA account to pay for your child's care.
Restrictions Common to All Plan Types:
Band-aids and aspirin
Under FSAs, HRAs, and HSAs, expenses for medicines and drugs are only excludable from an employee's gross income if the medicine or drug is prescribed or is insulin.
The prescription requirement does not apply to over-the-counter items that are not medicines or drugs (e.g., crutches or contact lens solution).
As of January 1, 2011, FSA and HRA debit card use is not permitted for over-the-counter medicines or drugs.
Domestic partners and their children
For an FSAs, HRAs, and HSAs, expenses cannot be reimbursed unless the Domestic Partner or child is the employee's tax dependent.
A Domestic Partner could establish his or her own HSA based upon the employee's family HDHP coverage.
About Dr. Berman:
Suzanne Berman, MD, FAAP, is co-founder and managing partner of Plateau Pediatrics, the first NCQA-certified level 3 patient centered medical home in Tennessee. She serves the American Academy of Pediatrics (AAP) in a variety of roles―including the executive committee of the Section on Administration and Practice Management and the Committee on Child Health Financing. Dr. Berman frequently contributes to AAP projects and publications regarding medical home practice transformation, rural health, coding, data mining, and policymaking. She and her husband have three sons.
About Dr. Giardino:
Angelo P. Giardino, MD, PhD, MPH, is the Wilma T. Gibson Presidential Professor and Chair of the Department of Pediatrics at the University of Utah's School of Medicine and Chief Medical Officer at Intermountain Primary Children's Hospital in Salt Lake City, Utah. He holds subspecialty certifications in Pediatrics and Child Abuse Pediatrics from the American Board of Pediatrics. He is also a Certified Physician Executive (CPE) within the American Association for Physician Leadership. He completed the Patient Safety Certificate Program from the Quality Colloquium, is certified in medical quality (CMQ) as designated by the American Board of Medical Quality and is a Distinguished Fellow of the American College of Medical Quality. Within the American Academy of Pediatrics, Dr. Giardino is a member of the Committee on Child Health Financing, the Council on Child Abuse and Neglect, and the Council on Children with Disabilities.