Editor's Note: This article was written prior to Technical Release 2013-03 and parts of the article may no longer be accurate. For an updated article, see: HRAs, HSAs and FSAs in 2014 - Changes Under Health Reform (Updated).
The Affordable Care Act (known as ACA or health reform) was signed into law in 2010 and impacts many areas of health care and health insurance, including medical reimbursement programs such as HRAs, HSAs and FSAs. Here's an overview of how health reform impacts HRA, HSA and FSA programs.
What does HRA, HSA, FSA Stand for?
HRA = Health Reimbursement Arrangement
HSA = Health Savings Account
FSA = Flexible Spending Account
HRA, HSA, FSA - Changes Under Health Reform
Beginning January 1, 2011:
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Over-the-counter (OTC) medications are no longer eligible for reimbursement from a Flexible Spending Account (FSA), Health Savings Account (HSA), or Health Reimbursement Arrangement (HRA), unless obtained with a prescription (except for insulin).
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The excise tax for non-qualified HSA withdrawals doubled from 10% to 20%.
Beginning January 1, 2013:
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FSA employee salary reduction contributions were limited to $2,500 per plan year, with future increases to allow for inflation.
Beginning January 1, 2014:
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HRAs may need minor plan design changes to be ACA-compliant in 2014. HRAs will need to meet one of these five types of HRAs that are excluded from annual limit requirements outlined in health reform laws (PHS Section 2711):
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"Integrated" HRAs: An HRA linked with a group health plan.
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"Flexible Spending Arrangement" HRAs: A variation of a stand-alone HRA (as defined in section 106(c)(2)).
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"Excluded" HRAs: An HRA that only reimburses non-essential health benefits (e.g. only premium expenses).
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"Excepted" HRAs: An HRA that only reimburses limited excepted expenses (such as limited-scope dental).
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"Retiree" HRAs: An HRA offered to retirees.
What does this mean for existing and new HRAs? If the existing HRA does not meet one of these five types, then minor plan design changes may be needed. New HRAs will simply be set up in an ACA-compliant way.
There are several other health reform regulations that impact health insurance, employers, individuals and HRA/HSA/FSA providers. For a full list of health reform changes see Health Care Reform Timeline 2010 - 2020.
HRA vs. HSA vs. FSA Comparison Chart
Here is an HRA, HSA, FSA Comparison Chart with health reform updates:
|
HRA |
HSA |
FSA |
|
|
Who May Contribute |
Employer Only |
Employer or Employee |
Employer or Employee |
|
Cost of Employer Contributions |
Only pay for employee utilization (typically 25-50%) |
100% paid regardless of utilization |
100% paid regardless of utilization |
|
Average Cost to Cover $2,000/year Deductible |
$500-1,000 |
$2000 |
$2000 |
|
Maximum Annual Contribution |
No Maximum |
$3,300 (single) $6,550 (family) for 2014 |
Determined by Employer; Capped at $2,500 starting in 2013 |
|
Eligibility Requirements |
None or Determined by Employer |
Must have HSA-qualified health coverage ($1,250+ single / $2,500+ family deductible) |
None or Determined by Employer |
|
Each Employee Must Open a New Bank Account? |
No |
Yes |
No |
|
Tax Treatment |
Tax-free |
Tax-free |
Tax-free |
|
Medical Expenses Allowed |
Health Insurance Premiums & IRC 213(d), as Determined by Employer |
IRC 213(d) Expenses w/ No Employer Limitations |
IRC 213(d) Expenses; but no Personal Health Insurance Premiums |
|
Use for Non-Medical Expenses |
None |
None |
None |
|
Carryover of Unused Funds to Next Year |
Determined by Employer (not to exceed 4x the annual HRA allowance to be ACA compliant) |
Yes |
No |
|
Portable after Termination |
Determined by Employer |
Yes |
No |
|
Administrator |
Employer or TPA |
Employee |
Employer or TPA |
|
Cross-Compatibility |
With HSA* or FSA |
Limited-Purpose or Post-Deductible FSA or HRA |
With HRA or HSA* |
|
Employer Reporting |
Employer Views Detailed Utilization Reports |
No Tracking Possible |
Employer Views Detailed Utilization Reports |
*HSAs are fully compatible only with certain HRA & FSA administration platforms that enable HSA-Compatibility.
