What are the differences between HSA, HRA and 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 differences between these three kinds of accounts.

Health spending accounts are used to pay 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 on health care costs.

Types of health spending accounts

Health savings account, or HSA

A health savings account is like a 401(k) retirement account, but it's for medical expenses. You can only have an HSA if you enroll in an HSA-compatible insurance plan.

Health reimbursement arrangement, or HRA

A health reimbursement arrangement is a benefit account set up by your employer. They contribute a certain amount of money to the account each year for you to use. You can use it for medical expenses not covered by your health plan, such as deductibles or coinsurance. Only your employer can fund an HRA.

Flexible spending account, or FSA

A flexible spending account is set up by your employer. They own the account, but you get to decide which qualified medical expenses to pay for with your FSA. What makes it flexible? It works with most of our employer-sponsored health plans.

HSA vs. HRA vs. FSA: how they're different

Let's start with what they have in common. Money is deposited in these accounts tax free, and is taken out tax free or tax-deductible. You can use it to pay for qualified medical expenses, such as deductibles and copays. Each spending account comes with a debit card.

Where they differ is the kind of insurance plan they work with, who owns the account, who controls it and who can put money into it.

View the chart below for more comparisons.

Account Features HSA
HRA
FSA
You can use it to pay your deductibles or copays.
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You can use the money in the account before it's fully funded.    
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You own the account.
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Your employer owns the account.  
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Money put into the account that’s already been taxed (for example, money that was a gift) is tax deductible.
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It's deposited as an untaxed payroll deduction.
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You can invest the money.
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It comes with a debit card.
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