Browse by Topic

Browse by Plan Type

Other Help

Not finding what you need in this section for members and insurance shoppers? Check out our other help sections below.

What are the differences between an HSA, HRA and an FSA?

Who is this for?

Michigan Health Insurance – Customer Service – Health Spending Accounts

If you’re interested in health spending accounts, this information can help you learn the three kinds and what makes each one different.

Health spending accounts are used to get tax savings on money put away for your medical expenses. They’re part of what’s called consumer-directed health care.

“Consumer directed” means you manage more of the money you spend—and save—on health care costs. 

There are three kinds of accounts:

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

What do they have in common? Money deposited in these accounts goes in tax free, and goes out tax free or tax-deductible to pay for qualified medical expenses.

What makes them different? The kind of insurance plan they work with, who owns the account, who controls it and who can put money into it.

Health savings account

Health savings accounts are similar to a 401(k) retirement account for medical expenses. You can only have an HSA if you enroll in an HSA-compatible insurance plan. Here are other things you should know about an HSA:

  • You own the account.
  • Anyone can put money into the account.
  • Money taken out of your paycheck by your employer 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.
  • You can invest the money.

Health reimbursement arrangement

A health reimbursement arrangement is a benefit set up by your employer. It’s a fund that pays for medical expenses not covered by your health plan, such as deductibles, coinsurances or both. Other features of an HRA: 

  • The fund is owned by your employer.
  • Your employer decides which expenses are covered by the HRA.
  • Money given to you for medical expenses is tax deductible for your employer.
  • You don’t have to pay taxes on money you get from an HRA used for qualified medical expenses.
  • Your employer decides whether leftover money in your HRA can roll over to the next year.
  • The money in an HRA can’t be invested.

Flexible spending account

An FSA is set up by your employer. They own the account, but you get to decide what qualified medical expenses to pay from your FSA. What makes it flexible? It works with most of our employer-sponsored health plans. Here are more facts about an FSA.

  • 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 you carry up to $500 into the next year. Otherwise, any money left in the account at the end of the year goes back to your employer.
  • You can’t invest the money.

Was this content helpful?

Rate it

Submit >

One site. One stop.

Managing your health plan online
has never been easier. On the new bcbsm.com, all your account information is in one place and personalized, so it's more useful.
Even better, you can access it anytime, anywhere, from your mobile device.

I’d like to register

Log in to my account

©1996-2014 Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. We provide health insurance in Michigan.

State and Federal Privacy laws prohibit unauthorized access to Member's private information. Individuals attempting unauthorized access will be prosecuted.

Site Map  |  Feedback  |  Important Legal and Privacy Information

Explanation of Level A Conformance
Better Business Bureau Online Seal of Reliability