Which Health Spending Account is Right For You?


| 2 min read

Health spending accounts are like personal bank accounts for your health. Simply put, it’s a way to save money on medical expenses, and it’s tax-free. There are three kinds of accounts: Health savings accounts (HSA), health reimbursement accounts (HRA) and flexible spending accounts (FSA). HSA Health savings accounts are like a 401(k) retirement account for medical expenses. The catch? You can only have an HSA if enrolled in a high-deductible plan. What you need to know:
  • The consumer owns the account.
  • Anyone can put money into the account.
  • Money taken out of a paycheck for the account isn’t taxed.
  • Money put into the account that’s already been taxed (for example, money that was a gift), is tax deductible.
  • Money in the account can roll over from year to year.
  • The money can be invested.
HRA A health reimbursement account is a benefit set up by the employer. It’s a fund that pays for medical expenses not covered by the health plan. What you need to know:
  • The fund is owned by your employer.
  • The employer decides which expenses are covered by the HRA.
  • Money given to you for medical expenses is tax deductible for your employer.
  • It’s not taxed when used for qualified medical expenses.
  • The employer decides whether leftover money can roll over to the next year.
  • The money can’t be invested.
FSA A flexible spending account is set up by the employer. They own the account, but the individual decides what expenses can be paid. What makes it flexible? It works with most employer-sponsored health plans. What you need to know:
  • Only you and your employer can put money into the account.
  • You can only deposit money into your FSA through payroll deduction. That money isn’t taxed.
  • Some employers let individuals carry up to $500 into the next year. Otherwise, any money left in the account at the end of the year goes back to the employer.
  • The money can’t be invested.
For more health insurance tips visit bcbsm.com/101 or follow the hashtag #Covered101 on our social channels. If you have a specific question, please submit your query online through our Customer Action Center. Photo Credit: Regan Walsh
MI Blues Perspectives is sponsored by Blue Cross Blue Shield of Michigan, a nonprofit, independent licensee of the Blue Cross Blue Shield Association