Health Spending Accounts

You can use these accounts for qualified medical expenses, such as deductibles, copays and coinsurances. Health spending accounts come in three forms:

  • Health savings account, or HSA
  • Health reimbursement arrangement, or HRA
  • Flexible spending account, or FSA

Types of Health Spending Accounts:

Each of these accounts works differently and comes with its own advantages. Find out more about how they work.

Health Savings Accounts

A health savings account, or HSA, is an account you use to pay for qualified medical, pharmacy, dental and vision expenses and save on taxes. The key things to know about HSAs are:

  • You must be covered by a high-deductible health plan to open an HSA
  • You own your HSA and the money in it
  • It’s not a “use it or lose it account”; funds roll over from year to year
  • Anyone can deposit money in your HSA, up to an annual limit set each year by the IRS

Compared to other health spending accounts, HSAs give you more ways to save on taxes and healthcare expenses, now and in the future.

Health Reimbursement Arrangements

An HRA, or health reimbursement arrangement, is a kind of health spending account provided and owned by an employer. The money in it pays for qualified expenses, like medical, pharmacy, dental and vision, as determined by the employer.

Other Key Things to Know about HRAs are:

  • Only your employer can put money in an HRA
  • You don’t pay taxes on money that comes from an HRA
  • Your employer decides whether to let unused funds roll over from one year to the next

Employers have more say in how HRAs work and have more options to choose from than other health spending accounts.

Kinds of HRAs

Employers not only decide what an HRA will pay for, they can decide when it pays, by choosing from different designs. Here are a couple of examples:

  • HRA pays first: You use the funds until gone then you pay expenses your plan doesn’t cover
  • You pay first: You pay for expenses not covered by your plan until you reach an amount set by your employer, then the HRA pays

Flexible Spending Accounts

Flexible spending accounts can help you save money on taxes by setting aside pretax income for qualified medical, dental or vision expenses or dependent care.

A flexible spending account or arrangement is an account you use to save on taxes and pay for qualified expenses. Other key things to know about FSAs are:

  • Your employer provides and owns the account
  • Only you and your employer can put money in an FSA, up to a limit set each year by the IRS
  • FSAs are a “use it or lose it” account; your employer can keep funds you haven’t used by the end of the year

What makes them flexible? They give employers the most options when deciding on what spending accounts to offer.

Kinds of FSAs:

Your employer will tell you which one of these FSAs is available to you.