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HRAs and HSAs

HRAs and HSAs

HRAs and HSAs are usually used in combination with high deductible health plans or HDHPs. As the name means, HRAs and HSAs normally have higher deductibles than the managed care plans. All of them belong to the Consumer Driven Health Plans or CDHPs, which is an alternative to the managed care plans. Consumer Driven Health Plans persuade people to become concerned with their healthcare options.

Health Savings Accounts (HSAs)

Health Savings Accounts are tax-free accounts intended to help people disburse for the medical emergencies as well as treatments. The people and the employers can contribute to an HSA, till the highest level of contribution is reached. Health savings accounts can be utilized to pay for all the qualified medical expenditures that are not covered by normal high deductible medical insurance.

Health Reimbursement Arrangements (HRAs)

Health Reimbursement Arrangements are basically employer-sponsored accounts which reimburse employees for particular healthcare expenditures when get combined with high deductible medical insurance plans.

Employers disburse a part of healthcare expenses till certain amount is reached, which is while the health insurance plan picks up remainder. You will have to disburse a particular percentage of your healthcare expenses till your highest out-of-pocket cost is reached, after which all claims are paid by the plan. Several employers permit rolling over unused HRA fund from year to year. Unlike Health Savings Accounts, HRAs don't engage any separate savings accounts.

HRAs are likely to be similar to more conventional medical insurance plans; while Health Savings Accounts impose more accountability on the consumers requiring them to decide which health expenditures are worth to be paid for.

Advantages and Disadvantages

The promoters of the HSAs believe that such accounts when combined with High Deductible Health Plans will push people to take more financial attention in their healthcare than the conventional health insurance plans do. Preferably, smaller expenses will come from HSAs and expenditures for an emergency will be covered by the insurance company. By imposing this liability on you, they believe, you will try to make better and cost-effective decisions (like brand name prescription drugs versus generic drugs) which would keep the premiums down for everybody.

On the other side, the opponents feel that the people lack information to make wise and well-informed decisions on medical expenses. They also feel the people may be afraid of the cost factors. They agonize that the concern might be taken off preventive care and people may not look for treatment till they have severe pain or in requirement of a costly procedure.

Who benefits from the HRAs and HSAs?

If you are healthy and young and believe that you can make good decisions regarding healthcare, you may have the benefit of low premiums HSAs offer when having the safety of knowing you'll be covered in any emergency circumstances. But, if you need several doctor visits as well as medical treatments or prescriptions, you may find that you're buried by the expenditures or stuck within the “coverage gap” (an amount between what you may pay from your HSA and the deductible). Many people having HRA coverage report their satisfaction with such plans is no less than conventional medical insurance plans.

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