HRA vs. HSA vs. FSA comparison chart

By Elizabeth Walker on January 16, 2026 at 1:45 PM

As healthcare costs rise, you may wonder how to continue offering employees at your small to mid-sized business an affordable yet competitive health benefit. One way to help employees with increasing health costs and recruit and retain top talent is with an account-based health plan (ABHP).

ABHPs — which include health reimbursement arrangements (HRAs), health savings accounts (HSAs), and healthcare flexible spending accounts (FSAs) — are budget-friendly and flexible benefits that can cover your employees' out-of-pocket medical expenses. However, each benefit has its own rules and regulations, so it’s vital to know how they work before implementing one.

This article will compare and contrast HRAs, HSAs, and FSAs so you can select the right benefit for your budget and employees.

In this blog post, you’ll learn:

What account-based health plans are and why many employers use them as an alternative or supplement to traditional group health insurance.

The key differences between HRAs, HSAs, and FSAs for employers and employees.

How recent federal updates may impact your benefit strategy and help you choose the best option for your organization.

Why should I offer an account-based health plan (ABHP)?

Before we dive in, let’s cover why you should consider ABHPs as part of your health benefits package.

ABHPs allow employers to use tax-advantaged dollars to help their employees pay for healthcare costs, meaning employees save money on out-of-pocket expenses. They’re also flexible, so you can design their benefit to best fit your company’s and employees' needs.

In most cases, you can pair a group health insurance plan with a medical spending account so it can serve as a supplement to your existing insurance. However, you can use some types of ABHPs, such as stand-alone HRAs, as a total replacement for a group policy. This way, employees can use their benefit dollars to purchase an individual health insurance plan, pay for their medical expenses, or even opt into their spouse’s health insurance policy.

What account-based health plan options are available?

The three tax-advantaged benefits we’ll go over are the HRA, HSA, and healthcare FSA. Each one allows employers to offer tax-free money to employees for qualifying medical expenses, but each ABHP works a little differently.

Health reimbursement arrangement (HRA)

First is the HRA. Instead of an account that you and your employees contribute to, an HRA is an arrangement between you and your employees. You offer your employees a set monthly allowance that they can use to buy qualifying out-of-pocket medical costs, such as prescription drugs, mental health counseling, and individual health coverage (depending on the type of HRA).

Once your employees incur an eligible expense, you reimburse them tax-free for the cost. In most cases, any unused HRA funds stay with you at the end of the year or if an employee leaves your company.

HRAs also have tax benefits. HRA contributions are tax-deductible and payroll-tax-free for employers. Reimbursements are also income tax-free for your employees as long as they have a qualifying health plan that provides minimum essential coverage (MEC).

Here are the three HRAs that you can offer with PeopleKeep by Remodel Health:

A qualified small employer HRA (QSEHRA) is for small businesses and nonprofits with fewer than 50 full-time equivalent employees (FTEs). You can’t offer it alongside a group plan. Unlike other HRAs, QSEHRAs have annual maximum contribution limits. You must offer the QSEHRA to all your full-time W-2 employees, and they must have a health plan that provides MEC to participate.
1. Your part-time employees can also use the QSEHRA, provided your plan details permit it, they have proper health coverage, and they receive the same allowance as your full-time employees.
The individual coverage HRA (ICHRA) is for organizations of all sizes that want to offer a total replacement ABHP. The ICHRA has no maximum contribution limit and allows employers to customize their benefits based on 11 employee classes. Only W-2 employees with a qualifying individual health plan are eligible to participate in the ICHRA. Unlike the QSEHRA, organizations can offer an ICHRA alongside a group health plan. However, they can’t offer both benefits to the same class of employees.
1. If your organization has 50 or more FTEs, offering an affordable ICHRA can help you satisfy the Affordable Care Act’s employer mandate.
The group coverage HRA (GCHRA), or an integrated HRA, allows you to supplement your existing group health insurance policy. Only employees who opt into your employer-sponsored insurance plan can participate. Like the ICHRA, GCHRAs have no minimum or maximum contribution limits and are customizable using employee classes.

A stand-alone HRA, like a QSEHRA or ICHRA, is an excellent option for organizations looking to offer an alternative to traditional group health insurance.

Health savings account (HSA)

Next is the HSA. An HSA is a special bank account that allows participants to save pre-tax dollars for future medical expenses. Banks or HSA administrators typically issue debit cards to account holders so they can easily pay for healthcare items and services. Either an individual or an employer can open an HSA. However, in either case, the individual always owns it.

Unlike an HRA, both you and your employee can contribute funds to this account, so it’s a combination of your employee’s money and money provided by your organization.

To contribute to an HSA, the employee must enroll in an HSA-qualified high deductible health plan (HDHP). All contributions remain in the HSA indefinitely until an employee uses them. There’s no vesting schedule or tax penalty if the money goes unspent, and the funds roll over yearly. However, annual limits determine the maximum amount you can contribute.

Employees aged 65 and older can use their HSA for any item without incurring a penalty. Individuals under 65 can only withdraw HSA funds tax-free to cover qualified out-of-pocket medical expenses. If they spend the funds on any ineligible items before turning 65, they must pay federal income taxes on the money, plus a 20% penalty.

Lastly, as part of the One Big Beautiful Bill Act (OBBBA) passed by Congress on July 3, 2025, there have been some further changes to HSAs¹.

Effective January 1, 2026:

The federal government will treat on-exchange bronze and catastrophic plans as HDHPs². IRS Notice 2026-05 further clarified that this also applies to off-exchange bronze and catastrophic plans if the same plan is available on-exchange. This means that individuals enrolled in these plans can contribute to an HSA.
Enrolling in a direct primary care (DPC) arrangement will no longer prevent someone from contributing to an HSA, as long as the DPC only covers primary care services.
1. In 2026, DPC arrangements must charge a flat, recurring fee, capped at $150 per month for individuals and $300 per month for families. Plans exceeding these limits won’t qualify.
The IRS will consider fees paid for qualifying DPC arrangements as eligible medical expenses.

Flexible spending account (FSA)

Finally, there’s the healthcare FSA. An FSA is another employee benefit that allows for tax-free reimbursement of qualified healthcare expenses. Like an HRA, health FSAs are also employer-owned accounts. Employees contribute to their FSA through payroll deductions (up to the annual contribution limit) taken out on a pre-tax basis. Just like an HSA, employers can also contribute funds to their employees' accounts.

But unlike an HSA, FSAs are tied to employment. This means that an employee can’t keep their FSA funds if they leave your company.

There are also limitations to rollover amounts. According to IRS Revenue Procedure 2025-32, employers may carry over up to $680 of FSA funds in 2026³. Otherwise, FSAs have a “use it or lose it” provision, meaning the employee must forfeit their unused balance at the end of the year.

HRA vs. FSA vs. HSA comparison chart

Benefit overview	HRA	HSA	FSA
What is it?	HRAs are employer-funded, tax-advantaged health benefit plans employers use to reimburse employees for eligible medical expenses. There are six types of HRAs: QSEHRAs, ICHRAs, GCHRAs, excepted benefit HRAs (EBHRAs), retiree-only HRAs, and one-person stand-alone HRAs.	HSAs are individual employee bank accounts that allow for tax-free payment or reimbursement of eligible out-of-pocket costs.	Healthcare FSAs are employer-established benefit plans that allow for tax-free reimbursement or payment of qualified medical expenses.
Who is eligible?	All W-2 employees are eligible as long as they have proper health coverage and the employer offers the benefit to them. Depending on the type of HRA, employers can customize eligibility by employee class. With a QSEHRA, employers can also choose to exclude part-time employees. Owner eligibility depends on the type of business entity.	To contribute to an HSA, an employee must enroll in an HSA-qualified HDHP with no other major medical coverage.	All employees who aren’t self-employed can participate in an FSA.
Account ownership	Employer-owned arrangement.	Employee-owned account.	Employer-owned arrangement.
What is the average employer contribution cost?	Only pay for employee utilization (typically 75% based on PeopleKeep customer usage). Employers set a monthly or annual contribution limit.	100% paid regardless of utilization. Employers set a monthly or annual contribution limit.	100% paid regardless of employee utilization. Employers set a monthly or annual contribution limit.
Who can contribute?	Only the employer. The employee cannot contribute their own money.	Anyone, including the employee, employer, and others.	The employee and employer, if they choose.
What are the annual contribution amounts?	Employers determine their contribution amounts. However, the IRS does set maximum limits for the QSEHRA and the excepted benefit HRA (EBHRA).	In 2026, the maximum contribution amount is $4,400 for individuals and $8,750 for families. There are no limits to savings over time.	Employers determine their contribution amounts, but can’t exceed the IRS annual limit of $3,400 in 2026.
Is the account/ arrangement taxed?	No, it’s tax-free.	No, it’s tax-free.	No, it’s tax-free.
Is a health insurance plan required?	The type of health plan your employees need depends on the type of HRA. Employees can receive tax-free reimbursements through a QSEHRA if they have a policy with MEC. This can include individual health insurance plans or coverage from a spouse or parent. Employees must have a qualified individual plan with MEC to use an ICHRA. This includes Medicare Parts A and B or Part C. Integrated HRAs require employees to enroll in their employer’s group healthcare plan.	Yes. Employees must have an HSA-qualified, high-deductible health plan to participate in the benefit. As of 2026, this now includes bronze and catastrophic plans available on the public exchanges.	It depends. A limited-purpose FSA is an excepted benefit and doesn’t require the purchase of insurance. A health FSA must accompany group insurance to comply with ACA mandates and market reforms.
Does the benefit reimburse/pay for out-of-pocket medical expenses?	Yes. Unreimbursed medical care expenses as defined by IRC 213(d)⁴.	Yes. Unreimbursed medical care expenses as defined by IRC 213(d).	Yes. Unreimbursed medical care expenses as defined by IRC 213(d).
Does the benefit reimburse/pay for health insurance premiums?	Yes, a QSEHRA or ICHRA can reimburse employees for health insurance premiums. An EBHRA can only reimburse excepted benefit premiums, like dental insurance.	No.	No.
Do unused funds roll over to the next year?	Determined by the employer. QSEHRA allowances can roll over year-to-year, but total allowances can’t exceed the IRS-set annual contribution limit. ICHRA allowances can also roll over annually. If you’re offering an HRA through PeopleKeep by Remodel Health, you can only rollover allowances monthly, not yearly.	Yes.	Determined by the employer. However, the IRS states that employers can allow up to a $680 rollover in 2026, establish a 2.5-month grace period to use unspent funds, or prohibit rollovers to the following year.
Who is the plan administrator for the account/ arrangement?	Employer or third-party administrator (TPA).	Employee.	Employer or third-party benefits administrator.
Is the account/ arrangement portable after termination of employment?	No. HRA funds aren’t available if the employee no longer works for the employer. However, they may have access to a runout period to request reimbursement for expenses incurred while employed.	Yes. Employees retain continued access to the HSA and all unused tax-free funds even if they no longer work for the employer.	No. FSA funds aren’t available if the employee no longer works for the employer.
Benefit compatibility	QSEHRA: HSA (with coordination) ICHRA: HSA (with coordination), FSA (with coordination) GCHRA: HSA (with coordination), FSA (with coordination), traditional group health plans	HSA-qualified high deductible health plan, HRA (with coordination), limited-purpose FSA	Health insurance, HRA (with coordination), HSA (with coordination)

Conclusion

Employers must know all their options before designing a competitive health benefit that keeps costs down. Fortunately, several modern benefits are available that are more effective and affordable than traditional health plans. Whether you opt for an HRA, HSA, or FSA, your employees will get the flexible coverage they expect at a price you can manage.

If you think a personalized HRA is right for your company, schedule a call with us at PeopleKeep by Remodel Health, and we’ll help you design and manage your benefit!

This blog article was originally published on January 1, 2017. It was last updated on January 16, 2026.