The “health care account” is the primary mechanism of CDH and may take several forms:
Health Savings Accounts (HSAs) offer employees maximum control over their health care spending. These plans typically provide for virtually no “gatekeeping” (restrictions imposed by other types of health plans). Consumers are free to make medical decisions and expenditures as they see fit. HSAs are owned outright by the individual, including employer contributions from the time of deposit. All contributions to an HSA are tax-free, as is the interest earned on HSA balances.
Health Reimbursement Arrangements (HRAs) paired with the right health plan can cover expenses people face most often (e.g. dental, vision, dependent coverage, etc.). Contributions are made exclusively by the employer, and funds deposited into the account are not subject to income, FICA or worker’s compensation tax.
Flexible Spending Accounts (FSAs) provide a higher degree of discretion over health care budgets. Qualified expenses may go beyond services like copays, health insurance premiums, prescription and over-the-counter medications to include expenses such as child care or elder care. Individuals choose how much to contribute to an FSA. All FSA contributions are tax-exempt.
Employers may also contribute to these plans and reclaim unused funds at year’s end. FSAs are typically used in conjunction with other health plans.