How do HRA, HSA and FSA differ when you’re eligible for Medicare?

Posted August 12, 2019 Employee Benefits , , ,

Does your health insurance policy include a spending account or reimbursement arrangement from which you can pull funds for out-of-pocket healthcare expenses? If so, you most likely have an HSA, Medical FSA, or an HRA attached to your health plan. Below, we’ve broken down each term to clarify the differences between all three.

Health Savings Account (HSA)

HSAs are available to individuals who are enrolled in Qualified High Deductible Health Plans (HDHPs). If you aren’t enrolled in a Qualified HDHP, you may not contribute to an HSA. In many ways like a 401(k), the money deposited by an employer and/or an employee is most often a pre-tax payroll contribution. The HSA money can be invested in a guaranteed interested account or protected securities, and can be used to pay for any Qualified Medical Expenses (QMEs). Employees own their HSA dollars in their own HSA bank account. The tax favored money is not lost at the end of the year like the “use it or lose it” provision contained in many Medical FSAs.

Examples of Qualified Medical Expenses (QMEs):

Acupuncture
Ambulance
Birth control pills
Chiropractor
Contact lenses
Crutches
Dental Treatment
Eye exam
Fertility enhancement
Hearing aids
Home care
Hospital services
Medicines
Nursing home
Optometrist
Physical examination
Psychiatric care
Psychologist
Vasectomy
Vision correction surgery
Wheelchair

HSA and Medicare:

If your group health plan has an HSA and you want to continue to contribute to your HSA, then you DO NOT want to enroll in any form of Medicare, including Medicare Part A. If you are able to decline Medicare while working, and you continue to contribute to an HSA, make sure you stop contributing when your Medicare goes into effect to avoid a tax penalty. In many cases, Medicare will make Part A effective retroactively, up to six (6) months prior to your application date.
Check with your local Social Security Office to find out when Part A would become effective for your particular situation.

Medical Flexible Spending Account (FSA):

Like the HSA, all money saved is pre-tax. Any money spent is also considered pre-tax. When the benefit year ends, any money not spent will be lost unless your employer’s plan contains a specific provision allowing for a small carry-over year after year.

Health Reimbursement Arrangement (HRA):

The account allows you to be refunded by your employer for certain out-of-pocket healthcare expenses. HRAs often contain specific language about which claims are reimbursed and what you must provide to your employer for the reimbursement process. Some HRAs are designed to allow for a balance to be carried over from one benefit year to the next. Other HRAs are designed so that any money not spent will be lost at the end of the benefit year.

Have more questions?

Here at Henderson Brothers, we want to provide you with the best and most accurate information available. You have the right to be correctly informed about your options, and we want to ensure that you are able to make the decisions that are best for you and your family.  Please feel free to reach out to us if you have questions about your coverage or need assistance to find a new policy. We are licensed agents with expert knowledge who are ready to serve you. We look forward to hearing from you!

Contact the Expert

 


Please note that the information contained in this posting is designed to provide authoritative and accurate information, in regard to the subject matter covered. However, it is not provided as legal or tax advice and no representation is made as to the sufficiency for your specific company’s needs. This post should be reviewed by your legal counsel or tax consultant before use.