Employees with both a Health Reimbursement Arrangement (HRA) plan and a Health Savings Account (HSA) can use both types of accounts, and receive the benefits from both. However, there are important IRS rules and guidelines around using both an HRA and HSA at the same time.
Therefore, a common question from employees is "If I'm enrolled in an HRA plan, can I use HSA dollars?" The answer is: Yes. However, it is important to use the right HRA Software for HRA-HSA Compatibility, and to not "double dip" for the same expenses.
Here are three (3) key things to know if you're using HSA dollars while enrolled in an HRA plan.
For background, see FAQ: Can I have an HRA and an HSA at the same time?
#1 Required HSA-Deductible with HRA Plans
If you are contributing to your HSA account and you have an HRA plan, the IRS requires your HRA to have an HSA-Deductible for certain types of expenses.
For 2013 and 2014, U.S. federal regulations require citizens to have a minimum deductible of $1,250/year ($2,500 for families) on their health insurance from all sources (including HRAs) in order to make tax-deductible contributions to their Health Savings Accounts (HSA).
This means that to make contributions to your HSA, all health insurance sources (whether it is an HRA or insurance plan) must not provide coverage until the HSA-Deductible is met (e.g. $1,250 for singles). However, there are five expenses can be reimbursed through your HRA without regard to your HSA-Deductible (often called "first-dollar coverage"). These expenses include:
- Health insurance premiums
- Wellness/preventive care (e.g. checkups, mammograms, smoking cessation, weight loss)
- Expenses resulting from accidents
- Dental expenses
- Vision expenses
Once the HSA deductible is met, your HRA can reimburse all qualified medical expenses.
#2 HRA Software Makes HSA-Compatibility Possible
Turn on the HSA-Compatibility feature in your HRA account.
At first review, these HSA-HRA rules seem complicated. However, HRA Software allows you to easily make your HRA compatible with the HSA-Deductible rules.
At Zane Benefits we call this feature "HSA-Compatibility." All HRA providers should allow you to make your HRA HSA-Compatible. By turning on HSA-Compatibility, HRA Software will add an HSA-Deductible and manage which types of expenses will be applied to the deductible, and which expenses can be reimbursed right away.
#3 No Double-Dipping with HRA and HSA
You cannot be reimbursed with HRA funds, for medical expenses you paid for with HSA dollars.
IRS Publication 969 specifies that with an HSA, qualified medical expenses cannot also be paid or reimbursed from another source, including HRAs. So, you cannot be reimbursed for the same expense from both an HSA and HRA.
Example of Double-Dipping: You go to the dentist for a cavity filling. You are billed for your portion of the dental service. You pay the dental invoice with your HSA-card. Then, you submit that same expense to your HRA Software provider for reimbursement. This is not allowed because you are paying the same expense with both the HSA and HRA.
Example of Proper HRA-HSA Use: You go to the dentist for a cavity filling. You are billed for your portion of the dental service. You submit the invoice to your HRA Software provider for reimbursement. You pay the dental invoice with non-HSA funds.