The rise of “consumer-directed” health care, where the consumer (participant) is responsible for managing the way they spend money on their health care costs, has led to the use of various types of health care spending accounts. Each account is used to pay for medical expenses, however the way it can be used, depends on the type of account established.
3 types of consumer-directed health care accounts:
- Health Spending Account (HSA) – requires High Deductible Health Plan (HDHP)
- Flexible Spending Account (FSA) – does not require HDHP
- Health Reimbursement Account (HRA) – often tied to a HDHP, but no requirement that they must be
The contribution limits for the HSA ($3,350 single/$6,750 family in 2016, $3,400/$6,750 in 2017) and health FSA ($2,550 in 2016) are set annually by the federal government. There is no limit on the contribution amount to an HRA, however, HRAs must be funded solely by employers.
Here is a helpful chart to understand the differences between and the ways to use a health savings account (HSA), health care flexible spending account (FSA) and health reimbursement account (HRA).