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HSAs and HRAs: do your employees complain about the cost of insurance deductibles? Consumer-directed plans can help.

Consumer-directed health care gives members control to make better decisions about their health care spending while creating awareness about the costs. Two terrific options for consumer directed health care are Health Savings Accounts and Health Reimbursement Arrangements.

Health Savings Accounts (HSA) are owned by the employee but the employer can make contributions. This special savings account is coupled with a specific type of insurance plan called a qualified high deductible health plan. The high deductible makes the cost of the insurance plan less than other types of plans. Employees save money in their HSA tax free in order to pay for the deductible. Unlike a Flexible Spending Account, money in an HSA rolls over from year to year. Banks usually charge a nominal monthly fee for an HSA.

A Health Reimbursement Arrangement (HRA) is a mechanism for setting aside money for an employee's health expenses. There is no separate bank account and the money set aside is fully owned by the employer. The employer contributes to the plan and is exempt from payroll taxes creating savings for the company. The employer can also designate what types of medical expenses will be reimbursed under an HRA giving the employer maximum control.

Key features of Health Savings Accounts (HSAs) and Health Reimbursement
Arrangements (HRAs)

Feature HRA HSA

Funding Group-funded Group and employee funded

Fund owner Group Employee

Requires high No Yes
health care

Eligibility All eligible employees Anyone without coverage
 and no Medicare

Portable Group discretion Yes

Tax Group reimbursements are * Group contributions not
Contributions tax-deductible for the group subject to payroll taxes
 and tax-exempt for the * After-tax member
 member. contributions are
 tax-deductible from
 gross income.
 * Pre-tax contributions
 can be made through
 payroll deduction.

Allowable Eligible IRS expenses Eligible IRS expenses and
withdrawals (generally limited to insurance under specific
 employer covered benefits) conditions.
 and insurance under specific

Year-to-year Group discretion Yes

This page is brought to you by the Detroit Regional Chamber's Health Care Central ... the hub for all business related health-care issues. For learn more about this initiative, visit or call (866) MBR-LINE.

The Detroit Regional Chamber offers a variety of consumer directed plans including the new Flexible Blue product for Health Savings Accounts. For more information, call your independent agent or Lazanda Anderson at (313) 596-0362.


The Detroit Regional Chamber sponsors a wide range of special health insurance options. Packages are designed exclusively for small and mid-sized employers and self-employed entrepreneurs. Through Blue Cross Blue Shield of Michigan and Blue Care Network, many plans are available including traditional, Preferred Provider Organization, Point of Service and Health Maintenance Organization. These plans may include extensive benefits normally available only to large firms. Visit the Health Care Central section of our Website at for more details.

Betty Jackson-Moore is director of insurance programs at the Detroit Regional Chamber.
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Copyright 2006, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Health Care CENTRAL
Author:Jackson-Moore, Betty
Date:Apr 1, 2006
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