COBRA

Health Accounts

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Health Incentive Accounts

Health Reimbursement Accounts

Health Savings Accounts

How They Work

Managing an HSA

Paying with an HSA

Who’s Eligible

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Health Accounts

Health accounts offered through employers or directly through banks and other financial institutions can help people save money and streamline the way they pay for health care. And consumers aren’t the only ones who benefit:

Employers can save on payroll taxes
Health plans can expand their products to attract and retain business
Health care providers often get patient payments faster

Types of health accounts
The three most common health accounts are:

FSAs and HRAs can be used with any type of health plan and are offered through employers. Only individuals who are covered by qualified, high-deductible health plans (as defined by the IRS) can open and contribute to HSAs. They may be offered through employers, or individuals with HSA-qualified health plans may open accounts on their own through a bank or other financial institution.

Other key differences include:

	HSA	FSA	HRA
Contributions	Account owners make tax-deductible contributions. Some employers will see that contributions are deducted before taxes in payroll checks. Employers, family members and any other individuals can also contribute.	Employee makes pretax contributions. Employer can contribute as well, although that is not common.	Employer deposits a set amount each year for each individual or family.
	Funds are available when they are deposited into the account.	The entire contribution amount is available on the first day of the plan year.	The employer chooses whether to make the entire amount available on the first day of the plan year or prorate the contributions throughout the year.
	Funds remaining at the end of the plan year are left in the account for future medical expenses.	Funds remaining at the end of the plan year are forfeited to the employer.	Funds remaining at the end of the year can be carried over if the employer allows.
	The IRS establishes annual contribution limits. Employees from the age of 55 until they are enrolled in Medicare can make additional contributions.	The employer determines contribution limits.	The employer sets the contribution amount.
Payment options	Debit card, online bill payment or self-reimbursement for qualified medical expenses.	Debit card, if offered by account administrator, or account holders pay for eligible expenses and submit requests for reimbursement.	Debit card, if offered by account administrator, or account holders pay for eligible expenses and submit requests for reimbursement.
Interest	Tax-deferred interest can accrue. Investment options are often available, if individuals choose.	No interest.	No interest.
Tax treatment for consumers	Account distributions are tax-free when used for eligible medical expenses.	Employee contributions are tax-free, reducing annual taxable income. Reimbursements are tax-free.	Reimbursements are tax-free.
Tax treatment for employers	Employer contributions are excludable for income and FICA tax purposes. Employee contributions made through pre-tax cafeteria plan salary reduction are not subject to employer FICA or other employment taxes.	Employer contributions are excludable for income and FICA tax purposes.	Employer contributions are excludable for income and FICA tax purposes.
Eligible medical expenses	Any out-of-pocket and unreimbursed expenses allowed under section 213(d) of the Internal Revenue Code, except amounts distributed to pay health insurance premiums.* * Premiums can be reimbursed for: Health insurance for people ages 65 and older (except Medicare supplement policies) COBRA premiums Long-term care premiums Health insurance premiums for people receiving unemployment compensation	Any out-of-pocket and unreimbursed expenses allowed under section 213(d) of the Internal Revenue Code, except health insurance premiums and long-term care services. Note: Employers can also offer FSAs for eligible dependent-care expenses or transit accounts for eligible commuting expenses.	Employers configure the account to reimburse all* or some of any otherwise unreimbursed expenses as defined under section 213(d) of the Internal Revenue Code. * Long-term care services and premiums for coverage under employer pretax plans are not reimbursable.
Eligible medical expenses	Account holders are responsible for ensuring that an expense is a qualified expense, should they be audited by the IRS.	Claims must be substantiated as eligible medical expenses before they will be reimbursed.	Claims must be substantiated as eligible medical expenses before they will be reimbursed.
Non-medical expenses	If the account holder uses the funds for non-medical expenses, the disbursements will be taxed as income and subject to a 10 percent tax penalty. People ages 65 and older can use the funds for non-medical expenses, but the disbursements will be taxed as income.	The funds cannot be used for non-medical expenses.	The funds can not be used for non-medical expenses
HR regulations	COBRA rights do not apply, but account owners can continue using the account after leaving an employer. Account holders can use their HSA to pay for COBRA premiums.	COBRA rights apply. Account holders cannot use their FSA to pay for COBRA premiums.	COBRA rights apply. Account holders can use their HRA to pay for COBRA premiums.
	If an employer chooses to contribute to their employees' HSA as part of a cafeteria plan, nondiscrimination rules apply. If an employer chooses to contribute to their employees' HSA outside of a cafeteria plan, each employee must be given the same amount.	Nondiscrimination rules apply.	Nondiscrimination rules apply.
	Application of ERISA rules depends on level of employer involvement.	ERISA rules apply.	ERISA rules apply.

Employers can also offer health incentive accounts (HIAs) that let employees earn rewards by participating in programs that promote healthy lifestyles.

Health savings accounts are offered by OptumHealth Bank, Member FDIC, and are subject to eligibility. This communication is not intended as legal or tax advice. Please contact a competent legal or tax professional for personal advice on eligibility, tax treatment and restrictions. Federal and state regulations are subject to change. Please check your health benefit plan materials to determine whether your employer will make supplemental contributions to your HSA.

Investments are not FDIC-insured, are not guaranteed by OptumHealth Bank and may lose value.

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