fsa-substantiation

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HRA (Health Reimbursement Arrangement)

Lively can simplify your understanding of HRAs. Here is what you need to know about HRAs, healthcare, benefits, retirement, and of course HSAs.

HRA 

An Integrated or Standard HRA is a way for employers to cover healthcare expenses that aren't completely paid for by a group plan. Learn the details here!

What is an Integrated or Standard HRA?

Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. She follows comedians like most people follow bands and believes an outdoor sweat session can cure almost any bad mood. She’s also been writing her first novel for so long, her mom doesn’t ask about it anymore.

Lauren Hargrave

Lively can simplify your understanding of healthcare benefits. Here is what you need to know about healthcare benefits and of course HSAs.

Healthcare Benefits

Lively can simplify your understanding of FSA rules in these articles.

Flexible Spending Account Rules Articles

What if I have or was offered job-based insurance?

Offered job-based insurance? Read our articles.

FSA (Flexible Spending Account)

Lively can simplify your understanding of FSAs. Here is what you need to know about FSAs, healthcare, benefits, retirement, and of course HSAs.

When you substantiate your FSA or HRA purchases, you verify their eligibility according to the IRS. Learn the rules of using your debit card for eligible items here.

When Do I Substantiate My FSA and HRA Purchases for the IRS?

Offering a health reimbursement arrangement to your employees can add a lot of value to your benefits package. We discuss the different types of HRAs and their advantages.

The Benefits of Offering an HRA to Your Employees

Let’s take a look at Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs) and see how each can help you save for healthcare.

HSA vs HRA Plan: Which is Better for Individuals and Families?

Flexible Spending Account Rules

Lively can simplify your understanding of benefits. Here is what you need to know about healthcare, benefits, retirement, and of course HSAs.

Benefits articles

Benefits

Lively can simplify your understanding of HSAs. Here is what you need to know about healthcare, benefits, retirement, and of course HSAs.

Lively is the modern HSA experience built for—and by—those seeking stability in the ever-shifting healthcare landscape. By harnessing modern innovation and deep industry expertise, Lively is committed to bridging today’s savings with tomorrow’s unknowns. Unlike traditional institutions hindered by bureaucracy, Lively’s commitment extends beyond initial set up to providing dedicated, ongoing support and education for every step. So each HSA can reach its maximum potential with minimal headache. 

Lively

Let’s take a look at two types of healthcare savings options, Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs).

Flexible Spending Account (FSA) vs. Health Reimbursement Arrangement (HRA):

An HRA is a fully employer-sponsored and funded spending account for healthcare expenses that employees can use to purchase healthcare items and services that fit their needs. Learn the details here.

How Does a Health Reimbursement Arrangement (HRA) Work?

Vicky Warren, once a nurse, now a freelance healthcare writer and social media coach.

Vicky Warren

Lively can simplify your understanding of employer health insurance. Here is what you need to know about employer health insurance, healthcare, benefits, retirement, and of course HSAs.

Employer Health Insurance

HSA (Health Savings Account)

Substantiation? Eligible expenses? FSA or HRA card declined and unsure why? While FSAs and HRAs are great for helping you save money, there are rules that may be a little confusing. With the right information, you can navigate through these rules easily. Here are a few tips to help you become an [FSA](https://livelyme.com/fsa/) or [HRA](https://livelyme.com/hra/) expert.

## What is substantiation and why is it required?

The IRS requires that every dollar spent from an FSA or HRA be eligible and verified. This verification process is "substantiation". This means that you need to prove that everything paid from your FSA or HRA is an [eligible expense](https://livelyme.com/whats-eligible/). 

Think of it like this: the IRS lets you use tax-free funds to pay for medical expenses. In exchange, they want proof that you are using those funds for the expenses they deem eligible.

Did your FSA or HRA provider request substantiation for a transaction? It's because the merchant that you purchased from was unable to substantiate the expense on their own. When this happens, your FSA or HRA provider will want documentation to ensure that your expense is eligible. 

## Follow the Rule of 5

When submitting documents and receipts for substantiation, be sure to follow the Rule of Five. If your documents, such as an itemized receipt or explanation of benefits (EOB), cover these five elements, approving your payments will be simple.

1. Patient or dependent name
2. Provider or merchant name
3. Date of service
4. Type of service or product
5. Expense amount

For dependent care, the document must come from a third party and may not be a cancelled check. 

## What is auto-substantiation?

When paying with your debit card, certain merchants have systems setup to identify eligible expenses. This helps providers authorize eligible expenses without any additional documentation. This process is "auto-substantiation". 

When an expense is auto-substantiated, you won't need to share any receipts with your FSA or HRA provider. Pay as you would with your FSA or HRA debit card and you're all set. 

Auto-substantiation is most commonly seen at large, national retailers and pharmacies. Big stores like Target, Costco, Walgreens, CVS, Amazon and the FSA Store are a few examples of retailers who are currently set up to auto-substantiate your FSA or HRA purchases.

## Why are some debit card purchases authorized, but I still need to submit a receipt?

The intent for your debit card is that it works at merchants and providers where most of the services and products are FSA or HRA-eligible. However, not all products at these stores are FSA or HRA-eligible. For example, you could be picking up some over-the-counter medication at a pharmacy, but grab a snack on the way out. Your medication is FSA or HRA-eligible - your snack is not. 

When you pay for items at these stores, the transaction goes through with the assumption that you purchased qualified expenses. 

Algorithms review the purchase to determine if it was an eligible expense. Sometimes, there isn't enough information from the merchant to auto-substantiate your purchase. This is when your provider would alert you that they need more information. There are many [different types of merchants](https://livelyme.com/blog/where-purchase-fsa-eligible-items/) where you can use your FSA. Depending on the inventory of FSA eligible items, some of these stores will require additional documentation.

## Why is my FSA or HRA debit card declining?

If you try to use your FSA or HRA debit card to purchase eligible items and it declines, there are a few reasons why this can happen. 

Your FSA or HRA debit card only works at certain providers and merchants. If you're worried about using your card at a merchant, you can [look up](https://www.sig-is.org/card-holders/store-locator) to see if there are any qualified merchants in your area. 

It is possible that your card declines when making a qualified purchase. When this happens, you can still pay for that qualified expense out-of-pocket. You can then submit the claim for reimbursement later and still receive the tax-advantaged benefits of an FSA or HRA.

In addition, make sure to run your card as a credit card, not a debit card, and skip entering the pin if asked for one. Remember, you cannot choose "cash back" when making a purchase with your FSA or HRA card.

Wondering why your card declined? Here are three common reasons this can happen:

1. You have not activated your card or the FSA provider suspended your card. (Expired, fraud prevention, etc.)
2. Your FSA or HRA has no funds remaining for this plan year, or it has insufficient funds.
3. You are attempting to purchase a mix of ineligible and eligible items with your card. Split your order and pay for only the FSA or HRA-eligible items with your debit card.
4. Bag or bottle deposit fees are added to the purchase - these are not FSA or HRA-eligible.

## Get familiar with eligible expenses

Lively makes it easy with our convenient "[What's Eligible](https://livelyme.com/whats-eligible/)" tool. You can easily search by HRA or the type of FSA you have and see what's qualified. 

Interested in learning more? Consult our [FSA Guide](https://livelyme.com/guides/flexible-spending-account-fsa/) and [HRA Guide](https://livelyme.com/guides/hra-guide/). 


Substantiating Your FSA or HRA Purchases for the IRS

Over the last [five years](https://www.statista.com/statistics/921593/gig-economy-number-of-freelancers-us/), the landscape of work has changed. Workers not only have more choice in who they work for and how they work, they are having more say in the types of benefits they want (hint: health insurance tops the list). This coupled with the high annual [inflation of medical costs](https://ycharts.com/indicators/us_health_care_inflation_rate#:~:text=US%20Health%20Care%20Inflation%20Rate%20is%20at%203.96%25%2C%20compared%20to,long%20term%20average%20of%205.20%25.) can cause employers to reevaluate their benefits package.

If you’re an employer looking for a cost-efficient way to bolster your benefits package– whether it’s because you’re trying to improve recruitment or retention efforts, or because you’re trying to reign in your health insurance spend, a Standard Health Reimbursement Arrangement (HRA) is a good option. Note: Standard HRAs are also known as Integrated HRAs, Group Coverage HRAs, or Traditional HRAs.

## A quick definition

Standard HRAs are a tax-free way employers can reimburse employees for qualified out-of-pocket medical expenses. The accounts are employer-owned and employer-funded, meaning the employer can choose how much they will contribute to the accounts, the cadence of contributions, and the expenses for which they’ll reimburse. The IRS has general guidelines about [eligible expenses](https://www.govinfo.gov/content/pkg/FR-2019-06-20/pdf/2019-12571.pdf), but employers may choose to further restrict that list. As an employer-owned account, unused funds will revert to the employer at the end of the plan. Employers also choose what happens to the account once the employee leaves the company either for retirement or otherwise.

## How does it work?

In order to offer a Standard HRA an employer must also offer a [group health insurance plan](https://livelyme.com/blog/what-is-group-health-insurance/) that meets the Affordable Care Act’s (ACA) definition of [minimum essential coverage](https://www.healthcare.gov/glossary/minimum-essential-coverage/). However, your employee doesn’t have to elect group coverage through your company in order to participate in your Integrated HRA, they can instead have group coverage through their spouse’s employer.

The employer then constructs their HRA based on what works from a budget perspective and the values of the company. They decide:
- How much they’ll reimburse 
- The expenses for which they’ll reimburse
- How the employees will access the money (i.e. will they have access to a debit card to pay for expenses directly, will they pay for the expenses first and submit for reimbursement or both?)
- What happens to unused money at the end of the year (does it roll over or expire?)
- Whether or not employees will retain access to the HRA when they retire

Once the employer has set up their Integrated HRA, they offer it to employees during [open enrollment](https://livelyme.com/guides/open-enrollment/) or a qualifying life event. If employees join the company outside of open enrollment, they can elect to participate in the HRA during their special enrollment period. 

If you use an HRA provider like Lively, we help make HRA administration simple for employers and easy to adopt for employees. We take care of substantiation and expense management, as well as provide highly rated customer service for employee inquiries and account support for admins. We also offer a user-friendly admin platform with clear guidance and comprehensive employer reports.

## What are the benefits of offering this type of plan?

Both employees and employers can benefit greatly when an Integrated HRA is included in the benefits package. Benefits of a Standard HRA include:   

1. Lower health insurance costs for employers. More claims against the Standard HRA means fewer claims filed with the insurance carrier, helping maintain or lower insurance premium rates.
2. Greater flexibility in the types of health insurance plans that are offered. For example, in order to participate in an [HSA](https://livelyme.com/guides/hsa-guide/), employees must be enrolled in a [High Deductible Health Plan (HDHP)](https://livelyme.com/guides/hdhp/), which might not work for them or their family. But a Standard HRA can be paired with any kind of [group health insurance plan](https://livelyme.com/blog/what-is-group-health-insurance/). That means employers can choose to offer the plans that work for their budgets and employees can choose the plan that works for their family and participation in the HRA isn’t affected.
3. Tax benefits. Employer reimbursements are considered a tax-deductible business expense.
4. Healthier and more productive employees. People with a way to pay for medical expenses are more likely to see the doctor when a health issue arises instead of waiting until it becomes an emergency. People who seek medical treatment are more likely to be healthy and the healthier your employees are, the [more productive](https://pubmed.ncbi.nlm.nih.gov/20562499/) they’ll be.
5. Increased employee retention and more effective recruiting. Losing an employee costs a company between 1.5x-2x their annual salary and employees are more likely to leave if they don’t feel supported at work. Offering a Standard or Integrated HRA to help employees pay for out-of-pocket medical expenses can help them feel more supported and increase their loyalty. It can also serve as an effective recruiting tool.

## How is it different from a stand-alone HRA?

Stand-alone HRAs include Qualified Small Employer HRAs (QSEHRAs) and Individual Coverage HRAs (ICHRAs) and serve the express purpose of helping employees purchase individual or family health insurance plans in the private market. So while Integrated HRAs are offered in conjunction with [group health insurance](https://livelyme.com/blog/what-is-group-health-insurance/), a QSEHRA or ICHRA can be offered in lieu of this type of plan. Another difference is, ICHRAs are intended to help pay for health insurance premiums while this type of expense is excluded from being reimbursed through an Integrated HRA. Other than that, they function very similarly.

## Eligibility requirements

For employees to be eligible to participate in an Integrated HRA, they must be enrolled in a group health plan. That can be through their employer or their spouse’s employer. If they plan to reimburse for expenses for their spouse and dependents through the HRA, their spouse and dependents must also be covered by a group health insurance plan. Dependents must also be under age 27 in order to have their out-of-pocket medical expenses reimbursed through the arrangement.

## Get started with Lively today!

If you’re looking to build a better benefits package for your employees or clients with a Standard HRA, [reach out to Lively](https://livelyme.com/contact-sales/) today!


Standard or Integrated Health Reimbursement Arrangements: What are They?

An [HRA](https://livelyme.com/guides/hra-guide/) is a fully employer-sponsored and funded spending account for healthcare expenses. You can think of it as an “allowance” your employer gives you to spend on certain kinds of medical expenses. There are five popular types of HRAs, each with different rules on eligibility and which expenses you can reimburse. The one rule they have in common is: you must sign up for this benefit through your employer during [open enrollment](https://livelyme.com/guides/open-enrollment/) (or during the special enrollment period if you’ve joined your employer mid-year). 

So if your employer does offer an HRA (regardless of type), that’s great news! This is how these types of accounts work.
Here are the four general steps of how an HRA works for companies and their employees:

1. The company sets an allowance amount. Some HRAs have federal limits on how much an employer can offer on an annual basis, while others allow the employer to contribute as much as it wants. Every year, the employer sets their annual limit for how much they will reimburse employees (not to exceed any applicable federal limits) and communicates this amount during open enrollment.
2. Employees purchase eligible healthcare items and services that fit their needs. Each type of HRA has different expenses that are eligible for reimbursement from the account. Some HRAs allow for reimbursement for all of the items and services listed under [IRS Code Section 213(d)](https://www.irs.gov/publications/p502), including health insurance premiums. Some do not allow reimbursement for health insurance premiums or copays and can only be used for out-of-pocket expenses like coinsurance responsibilities or deductibles. In most circumstances, the employer can further restrict the expenses for which their HRA can be used beyond IRS regulations.
3. Employees submit substantiation as well as proof of purchase. To receive reimbursement from most HRAs, employees will need to submit a receipt (i.e. substantiation) for proof of eligible purchase. The substantiation should include: name of person who received the service, the provider or merchant name, date of service (e.g. date service was incurred, not payment date), type of service or product, expense amount. 
4. The company reimburses the employee. Once reimbursement requests are submitted, the HRA administrator will review the request on behalf of the plan sponsor. If the expense qualifies, the employee will be reimbursed from their annual benefit. If the expense does not qualify, the HRA administrator on behalf of the plan sponsor has to follow a declined claims and appeals process which is outlined in their HRA documents.
These are the four general steps to how HRAs work. However, there are many types of HRAs and each has slightly differing rules. In the next section, we will go over the popular types HRAs, and note any specific rules or guidelines.

## How Standard HRAs work

A popular type of HRA available to businesses is the [Standard HRA](https://livelyme.com/blog/what-is-an-integrated-standard-hra/), which is also known as the Integrated HRA or Group Coverage HRA.

Integrated HRAs must be combined with a group health insurance policy. These HRAs are an option for all sizes of businesses and can be offered along with a [high-deductible health plan](https://livelyme.com/guides/hdhp/) or any other type of high-deductible policy as a way to help employees pay for the higher deductible.

To be eligible to participate in and reimburse from an Integrated HRA, a person must be:
- An employee of a sponsoring employer, or an employee’s spouse or dependent child under the age of 27.
- Actively enrolled in a [group health plan](https://livelyme.com/blog/what-is-group-health-insurance/) - either their employer’s group health plan or one offered by their spouse’s employer.

Here are the other unique characteristics of Standard or Integrated HRAs:
- There are no annual federal limits to the allowances employers give through their Standard HRAs. But employers can choose to place an annual cap on reimbursements.
- Standard HRAs can be used to pay for other [213(d) qualifying medical expenses](https://www.irs.gov/publications/p502), which are considered “standard” healthcare expenses, which is why it's referred to as a “standard HRA.”  Employers can choose to further restrict the expenses for which they will reimburse beyond what the IRS Guidelines state.

An HRA can offer both employers and their employees flexibility to get the care and coverage they need and a tax-free way to pay for healthcare expenses.

## How stand-alone HRAs work

Stand-alone HRAs are not specifically tied to a specific group health plan. Four popular types of HRAs are stand-alone: 
- The Qualified Small Employer HRA (QSEHRA) 
- The Individual Coverage HRA (ICHRA)
- The Excepted Benefit HRA
- The Retiree Only HRA 

### How qualified small employer HRAs(QSEHRA) work

QSEHRAs were created so that small employers (with less than 50 employees) that do not offer a group health plan can offer their employees a way to purchase health insurance in the private market. QSEHRAs are meant to help employees pay for health insurance premiums and other qualified out-of-pocket expenses. 

To be eligible to participate in and reimburse from a QSEHRA, a person must be:

- An employee of a sponsoring employer, or an employee’s spouse or dependent child under the age of 27.
- Actively enrolled in a health insurance plan that meets [minimum essential coverage](https://www.healthcare.gov/glossary/minimum-essential-coverage/) requirements. If the person ceases to be enrolled in qualifying health coverage, they won’t be able to reimburse from this type of HRA.

Here are the other unique characteristics of QSEHRAs:
- There is an [annual federal allowance limit](https://www.healthcare.gov/small-businesses/learn-more/qsehra/). The IRS sets the allowance limit for employees annually, but employers could choose a lower annual reimbursement amount. These allowances must be offered to all employees meeting eligibility criteria. 
- Employees might still qualify for premium tax credits. If employees use their QSEHRA to purchase a health insurance plan in the private market and their employer’s HRA allowance is too low to be considered “affordable”, that employee could qualify for premium tax credits.
- Unused balances are forfeited once an employee leaves the company.

### How individual coverage HRAs (ICHRA) work

Created in 2020, ICHRAs enable employers to reimburse employees for health care expenses and health insurance premiums on a tax-free basis. ICHRAs are meant to help employees pay for health insurance premiums and other qualified out-of-pocket expenses, so instead of signing up for a pricey employer-sponsored group plan, an employer can scale benefits across 11 customizable classes of employees. Each employee can choose an individual health plan from the marketplace that works best for their families, their doctors, and their prescriptions. This can relieve employers of the administrative burden of group plans.

To be eligible to participate in and reimburse from a ICHRA, a person must be:
- An employee of a sponsoring employer, or an employee’s spouse or dependent child under the age of 27.
- Actively enrolled in a qualifying health insurance plan purchased in the private market. Qualifying health insurance plan types include: ACA-qualifying individual coverage, catastrophic plans, transitional plans, fully insured student health coverage.

Here are the other unique characteristics of [ICHRAs](https://crsreports.congress.gov/product/pdf/R/R47041#:~:text=Employer%20contributions%20to%20an%20HRA,medical%20expenses%20are%20tax%2Dfree.):
- Employers can offer a [group health plan](https://livelyme.com/blog/what-is-group-health-insurance/) OR an ICHRA.
- There are no annual federal limits to the allowances employers can offer through ICHRAs. But employers get to choose how much they offer and can adjust those offerings based on family size or employee age.
- Ineligible for premium tax credits. But an employee can opt out of their employer’s ICHRA if the allowance is too low to meet the affordability threshold, purchase an ACA-compliant individual plan in the private market and qualify for premium tax credits that way. 
- If an employee separates from their employer they can retain access to ICHRA via [COBRA](https://livelyme.com/blog/a-guide-cobra-insurance/) if the employer allows.

### How Excepted Benefit HRAs work

Excepted Benefit HRAs are the most restrictive types of HRAs as their annual allowance limits are the lowest of the popular HRAs and the range of expenses for which you can reimburse through this type of account is narrow. On the plus side, there are no co-enrollment eligibility requirements to participate in an EBHRA. In fact, you can be uninsured and take advantage of this benefit. The one requirement is that you are either an employee of a company that offers an EBHRA, or the spouse or dependent (under age 27) of an employee. 

Here are the other unique characteristics of EBHRAs:
- The federal annual allowance limit for 2023 for EBHRAs is $1,950.
- This type of HRA can be used to reimburse for a limited list of expenses. These expenses include: premiums for individual health plans, COBRA, or dental and vision care, and coinsurance or copayments related to these types of insurance coverage.
- If an employee separates from their employer they can retain access to EBHRA via COBRA if the employer allows.

### How Retiree Only HRAs work
Retiree Only HRAs were created to give employers a way to help employees who retire from their company pay for health care in their golden years. There is no co-enrollment eligibility requirement to participate in and reimburse expenses from a Retiree Only, the stipulation is that you are the employee who retired from the employer that offers this benefit, or that employee’s spouse or dependent (under age 27). Spouses and dependents are able to reimburse from a Retiree Only HRA even if the former employee is deceased.

Here are the other unique characteristics of Retiree Only HRAs:
- Can use HRA to pay for Medicare premiums.
- There is no federal annual allowance limit but employers may put their own annual limits in place.

## Choose the HRA right for your business

While there are different rules that dictate how the [different types of HRAs](https://livelyme.com/guides/hra-guide/) operate, they all give employers a low cost way to supplement their benefits offerings and support their employees. If you offer your employees a group health plan and want to include a [Standard HRA](https://livelyme.com/blog/what-is-an-integrated-standard-hra/) in your benefits offerings, reach out to Lively today. Our user-centric design makes our Standard HRA easy for both HR staff and participants to use and our rich resource section ensures your employees will be well-supported.


How Does a Health Reimbursement Arrangement Work?

The notion that healthcare costs are on the rise is ubiquitous. What’s not as obvious is what you as a consumer can do about it. It can seem like the options are limited. That’s when opening either a Health Reimbursement Arrangement (HRA) or a [Health Savings Account (HSA)](https://livelyme.com/guides/hsa-guide/) can help you.

Both of these accounts can be used to pay for [qualified medical expenses](https://livelyme.com/whats-eligible/). There are a few more similarities: Employer contributions to both HSAs and HRAs are tax-deductible. Employee contributions to HSAs are tax-free, provided they have a qualifying [high-deductible health plan (HDHP)](https://livelyme.com/guides/hdhp/). 

But which account is better for you as an individual, or for your family? It’s going to depend on your specific needs. Let’s start with the basics.

## What is a Health Reimbursement Arrangement?

A [health reimbursement arrangement](https://livelyme.com/guides/hra-guide/) (HRA) is an employer-funded account from which employees can reimburse their out-of-pocket, qualifying medical expenses. It may give employees flexibility in terms of health insurance since it’s not tied to a particular plan.  Sometimes an HRA can be used to pay for your health insurance premiums, depending on which type of HRA an employer offers.

Employers can choose to allow your HRA contributions to rollover to the following year. Or allow employees to access their balance once they retire or leave the company for another reason.

There are several different types of [popular HRAs](https://livelyme.com/guides/hra-guide/): 

1. [Standard HRA](https://livelyme.com/blog/what-is-an-integrated-standard-hra/) (also known as Integrated HRAs): This type of HRA is offered as part of an employer-sponsored [group health plan](https://livelyme.com/blog/what-is-group-health-insurance/). The employer funds the account and from it employees can reimburse themselves for qualified medical expenses.
2. Individual Coverage HRA (ICHRA): Employees may use deposits to pay for health insurance premiums as well as qualified medical expenses. This enables employees to purchase their own health plans in the private market.
3. Excepted Benefit HRA (EBHRA): Employees can use deposits for out-of-pocket expenses related to dental, vision, short-term disability, etc. 
4. Qualified Small Employer HRA (QSEHRA): If an employer has fewer than 50 employees, they might offer this type of HRA. It helps employees buy health insurance plans in the private market and pay for other employer-approved expenses.
5. Retiree Only HRAs. These are offered to former employees of a company that offers this benefit. There’s no co-enrollment requirement and contributions can be used for Medicare premiums.

### The Benefits of an HRA

- You don’t need to buy a specific health insurance plan so you’re free to choose the one that works for you and your family. 
- Employers can make unlimited contributions to: Standard HRAs, ICHRAs, and Retiree Only HRAs. Qualified Small Employer HRAs and Expected Benefit HRAs have annual contribution limits set by the IRS. 
- Can be paired with a [Flexible Spending Account](https://livelyme.com/blog/how-does-an-fsa-work/) (FSA).

## What is a Health Savings Account?

A [Health Savings Account (HSA](https://livelyme.com/guides/hsa-guide/)), is a savings account into which you, your employer or anyone else can deposit money tax-free. You can use this money to [pay for qualified medical expenses directly](https://livelyme.com/blog/what-is-an-hsa/) by using the provided debit card. You can also reimburse yourself for expenses you paid for using your personal checking or savings accounts or credit card.

To qualify to open and contribute to an HSA you must also enroll in a [High Deductible Health Plan](https://livelyme.com/guides/hdhp/) (HDHP). If your employer doesn’t offer an HSA or an HDHP, you can buy both in the private marketplace.

[Annual contribution limits for HSAs](https://livelyme.com/blog/hsa-contribution-limits/) are set each year by the IRS and differ for individuals and families. Any unused contributions roll over to the following plan year and never expire. Meaning you can even take your savings into retirement. 

## The Benefits of an HSA

- __Multiple sources of contributions__. You, your employer, relatives or anyone else can contribute to your HSA.
- __Tax-free contributions__. You won’t pay federal income taxes, (most) state income taxes, or payroll taxes (FICA) on deposits taken directly from your paycheck. If your employer makes contributions, that money is not included in your gross income.
- __Tax-deductible contributions__. Any contribution made with after-tax dollars can be deducted from your gross income.
- __Tax-free distributions__.  If you use your HSA funds for a qualified medical expense, you will not have to pay taxes - ever. 
- __Your contributions never expire (even those made by your employer)__. This allows you to reimburse yourself for a medical expense you incurred years prior.
- __You can invest your contributions__. Plus, your funds can gain interest tax-free.
- __Make changes anytime__. You can start an HSA, change the amount you’re contributing or stop contributions altogether at any time during the year. You don’t have to wait for open enrollment.

## Which is better for me or my family?

To decide between an HRA and an HSA, look at your specific circumstances. Each account has different pros and cons, and every family has a different situation. Here are a few things to consider for each type of account:

### When You Should Choose an HRA

1. __You really want to keep your doctor__. If using your employer’s health insurance plan won’t allow you to do that, you could [choose an HRA](https://livelyme.com/guides/hra-guide/) over their health insurance plan. Whether it's a specialist or a pediatrician you love, sometimes keeping your doctor is important. If your employer offers an ICHRA or a QSEHRA, you could use it to buy a health insurance plan that allows you to keep your doctor.
2. __Your employer’s health insurance plan is inadequate for your needs__. If your out-of-pocket expenses are too high, you could use a [Standard HRA](https://livelyme.com/blog/what-is-an-integrated-standard-hra/) to help pay for them. Or you could use an ICHRA or a QSEHRA to buy a health insurance plan that works better for you.  
3. __Your medical expenses don’t change much from year-to-year__. Consistent expenses make it easy to plan how you'll use your HRA money.
4. __A HDHP won’t work for you or your family__. One drawback to high deductible health plans is the high deductible. If you’re not sure you can afford it, then an HRA and a more comprehensive health plan might be more suitable for your family.

### When You Should Choose an HSA

1. __You want to lower your monthly health insurance premium__. HDHPs typically have lower monthly premiums than other health plans. You can deposit the money you save on your monthly premium into your HSA tax-free. Then use it to help pay for your deductible or other qualified medical expenses.
2. __You rarely go to the doctor__. If you rarely use the medical system outside of preventative care (vaccines count as preventative care), then an HDHP/HSA combo might work for you.
3. __You can afford to put your own money into a health savings account__. Contributing your own money could allow you to save up for larger medical expenses down the road. Remember, HSA contributions never expire!
4. __You want to use your account to save for retirement__. Once you turn 65, your HSA works like a traditional retirement account. You can still use distributions tax-free for medical expenses, but you can also use them for things like groceries. It’s important to note that you will pay income tax on any disbursements you use for non-medical related expenses.
5. __You want to invest your deposits__. Investing is a great way to make passive income and to grow your HSA balance.
6. __You want flexibility on the timing of your deposits__. Maybe you get a year-end bonus and you want to deposit a portion of that into your HSA. Maybe you have major medical expenses for which you want a tax-free way to save. HSAs allow you to change the amount you contribute at any time, so you can deposit money when you have it (or need it), and forgo deposits when you don’t.

To decide between an HRA and an HSA, you’ll have to answer the following questions for your unique situation: 

- Why do I want to use one? 
- What will put me and/or my family in the best health and financial situation?
- Do the rewards of either account outweigh the potential risks or vice versa?

Both HRAs and HSAs can provide enormous benefits to the consumer. If you have questions about your specific employer-sponsored account, health plan or how these plans might affect your situation, reach out to your Human Resources department. If you want to learn more about HSAs, open an account, or learn about our Standard HRA [reach out to us](https://livelyme.com/) at Lively. 


What is the Difference Between an HRA and HSA?

Let’s face it, healthcare is expensive. Good thing for us, there are several types of accounts to ease the blow to our pocketbooks. In this post we’ll compare two types of healthcare savings options, [Flexible Spending Accounts (FSAs)](https://livelyme.com/guides/flexible-spending-account-fsa/) and [Health Reimbursement Arrangements (HRAs)](https://livelyme.com/guides/hra-guide/).

## How each can help you save on healthcare costs

Both FSAs and HRAs are employer-sponsored (and employer-owned), tax-advantaged accounts that can be used to pay for out-of-pocket medical expenses. Their differences lay in which expenses are eligible for reimbursement, who can contribute, and just how much control the employer has over how they function.  

## What is an FSA?

A [Flexible Spending Account (FSA)](https://livelyme.com/guides/flexible-spending-account-fsa/) is an employer offered, tax-exempt account. Both employer and employee can contribute and the funds you deposit are deducted from your paycheck pre-tax.

You can use your FSA funds to pay for eligible medical, dental and vision expenses that aren’t covered by your healthcare plan. Thousands of medical costs, from products to procedures, are covered under FSAs, including everyday items like bandaids, sunscreen and more.

Using your FSA account for healthcare related costs will help you save money. Additionally, if you don’t use all of your contributions by the end of the year, your employer can choose to offer you the option to either a 2 ½ month [grace period or a carryover](https://livelyme.com/blog/fsa-rollover-versus-grace-period/), the amount of which is set each year by the IRS, in which to use your balance. 

## FSA benefits

Flexible Spending Accounts offer several advantages, here are a [few of the benefits](https://livelyme.com/blog/is-fsa-worth-it-flexible-spending-account/).
- They’re not tied to any specific health insurance plan. Flexible Spending Accounts can be paired with any kind of health insurance or no health insurance at all. This flexibility gives employees the ultimate choice in how they handle their health insurance. Your entire annual contribution is available on day one. The entire amount you’ve pledged to contribute to your FSA for the year is available at the start of the benefit year (or shortly after the first contribution is made). So if you’ve pledged to contribute  $2,000 to your FSA for the year, the entire $2,000 is available to use at any time even if you haven’t made all of the contributions yet. Another cool feature of FSAs is, if you leave your company before the year is over, and you’ve used more than you’ve contributed, you don’t have to pay the money back.
- Set it up and don’t worry. FSA accounts are usually set up during open enrollment periods. Once the paperwork is complete, contributions are made automatically making saving for healthcare easy.
- Be sure to re-enroll each year, as most FSA’s don’t renew automatically.
- Take advantage of the tax breaks. FSA contributions made by both employees and employers are tax-free. Be sure to use your entire contribution each year, as FSA’s are a “use it or lose it” option. Some FSA’s have a grace period, and some allow you to carry over a predetermined amount set by the IRS each year, but not all. Review your specific plan carefully so you don’t lose your money.
- Purchase [thousands of health-related items](https://livelyme.com/whats-eligible/) with pre-tax dollars. Eligibility Scanner, a feature on the Lively [mobile app](https://livelyme.com/app/), also makes it easy for you to stay on top of what’s eligible. Scan a product’s barcode with the feature to instantaneously verify whether or not it’s eligible to purchase and/or reimburse with your healthcare FSA.
- FSAs are simple to use. Many FSAs offer debit cards, and others require reimbursement forms to be filled out. Either way, using pre-tax dollars to help pay for health care makes a little paperwork worth it.

## What is an HRA?

An HRA is a completely employer-funded account used to reimburse for health expenses. There are [many types of HRAs](https://livelyme.com/guides/hra-guide/), each with their own rules, but they all function as a reimbursement vehicle where the  employees pay for medical expenses, either with a debit card or pay-out-of-pocket first and submit said expenses for reimbursement. 

Like FSAs, contributions employers make to HRAs are tax-free. The IRS allows for a wide range of qualified medical expenses to be reimbursed from an HRA but employers can choose to further restrict the types of expenses that are eligible. Be sure to check your HRA plan documents to determine exactly the types of expenses for which you can reimburse. While HRAs are not health insurance, they can be used alongside your plan to help offset your individual costs.

## HRA benefits
Health Reimbursement Accounts offer some [great benefits](https://livelyme.com/blog/what-are-the-benefits-of-an-hra/) as well, here’s a few to consider.

- Employers can make unlimited contributions to: Individual Coverage HRAs, [Integrated or Standard HRAs](https://livelyme.com/blog/what-is-an-integrated-standard-hra/), and Retiree Only. While some health care spending accounts have strict contribution limits, these types of HRAs do not. Though only employers can contribute to HRAs, knowing they have no preset limits is nice. If your employer offers a Qualified Small Employer HRA (QSEHRA) or an Excepted Benefit HRA (EBHRA), these do have IRS-imposed annual contribution limits. 
- Self-care is encouraged through health spending. Because HRA funds don’t roll over and you stand to lose them if you leave the company, are fired, laid off or retire, some argue that HRAs promote self-care. Since HRA funds cannot be rolled over or kept indefinitely, it’s a good idea to use the benefit. The hope is you’ll schedule those appointments you’ve been putting off and seek the care you need rather than saving the money. Note: your employer can choose to roll over funds to the following plan year or make them available through COBRA.
- Fewer restrictions for eligibility. Many healthcare saving options such as Healthcare Flexible Spending Accounts (HFSA) and [Healthcare Savings Accounts (HSA)](https://livelyme.com/guides/hsa-guide/) have several eligibility requirements. HRAs do not have as many restrictions and should be considered if you find yourself ineligible for the other options.
- HRAs work with many types of insurance plans. Another reason HRAs make sense for many is that they can be used with more types of insurance plans. The Affordable Care Act (ACA) allows HRAs to be offered as long as they are integrated with a [group health plan](https://livelyme.com/blog/what-is-group-health-insurance/), which opens up more ways for employers to offer this benefit.

FSAs and HRAs both offer many benefits and can help you set aside money to use for the inevitable health care costs we all face. Take some time to compare and contrast your specific plans to decide what type of healthcare savings account makes the most sense for you.

If you are an employer who is interested in offering your employees a range of benefit options, including HSAs, FSAs, HRAs, and other wellness benefits accounts, [reach out to us](https://livelyme.com/contact-sales/) today.  

What's the Difference Between a Flexible Spending Account (FSA) and a Health Reimbursement Arrangement (HRA)?

It’s a given that offering your employees some form of health benefit is essential to [recruiting and maintaining talent](https://www.mckinsey.com/industries/healthcare/our-insights/employers-look-to-expand-health-benefits-while-managing-medical-costs). But offering health benefits can also help your employees to be [more productive](https://pubmed.ncbi.nlm.nih.gov/25559250/) because it makes them feel supported, helps to ensure they seek the care they need because they have a way to pay for it, and it can lower financial stress.

Now, the options for employers have to help their employees pay for healthcare costs are many and only seem to grow each year. In this post we’ll explore the value that offering a Health Reimbursement Arrangement (HRA) can bring to your employees and company as a whole.

## What are they?

An HRA is an employer-funded account that employees can use to reimburse for health-related costs. Overall, they help employers save money on healthcare while giving their employees options for spending on health-related needs. There are [many types of HRAs](https://livelyme.com/guides/hra-guide/), each with [their own rules](https://livelyme.com/blog/hra-rules/) about what can be reimbursed through the account, the annual limit for which employees can reimburse, co-enrollment requirements and more. Here are five popular HRA types:
- [Integrated or Standard HRAs](https://livelyme.com/blog/what-is-an-integrated-standard-hra/). These are offered alongside a group health plan. To participate, employees must be co-enrolled in a [group health plan](https://livelyme.com/blog/what-is-an-integrated-standard-hra/) either through their employer or their spouse’s employer. Anyone whose expenses are reimbursed through this account (i.e. spouse and child dependents) must be enrolled in a group health plan in order for their reimbursements to be eligible. Through this type of HRA they can reimburse for other qualified medical expenses like coinsurance responsibilities. There are no annual limits for employer contributions to this account.
- Individual Coverage HRA (ICHRA). These types of HRAs are not offered with a group health plan, and are instead offered as a way for participants to purchase an individual or family plan in the private market. As such, in order to participate in this type of HRA, the employee, and anyone else whose expenses are being reimbursed through the account, must be enrolled in a health plan that meets [ACA minimum essential coverage requirements](https://www.healthcare.gov/glossary/minimum-essential-coverage/). This type of HRA can be used to pay for health insurance premiums as well as other qualified medical expenses. There are no annual limits to employer contributions to this account.
- Qualified Small Employer HRA (QSEHRA). This type of HRA is also intended to help employees purchase individual or family health insurance plans in the private market. As such, in order to participate in this type of HRA, the employee, and anyone else whose expenses are being reimbursed through the account, must be enrolled in a health plan that meets [ACA minimum essential coverage requirements](https://www.healthcare.gov/glossary/minimum-essential-coverage/). This type of HRA can be used to pay for health insurance premiums as well as other qualified medical expenses. The IRS sets maximum contributions for individuals and family plans.
- Excepted Benefit HRA (EBHRA). This type of HRAs can be offered alongside a group health plan but there is no co-enrollment requirement for employees or their spouses or dependents to participate. In fact, employees don’t have to be enrolled in any health plan at all. These types of accounts can be used to pay for dental and vision insurance premiums as well as qualified medical expenses related to general health care like copays, coinsurance responsibilities and prescriptions. The IRS sets annual employer contribution limits for these type of HRAs.
- Retiree Only HRA. This type of account is a way for employers to offer their former employees a retirement benefit. These types of accounts can be used to pay for Medicare premiums and other out-of-pocket medical expenses and do not carry a co-enrollment requirement to participate.

## The six ways HRAs bring value to an employers’ benefits offerings

[HRAs](https://livelyme.com/guides/hra-guide/) can offer companies of multiple sizes across many industries flexibility and cost savings, and help their employees stay healthy and productive. 

1. Increased flexibility in how you help employees pay for health-related costs. If you’re a small employer, paying for a group health plan might be cost-prohibitive. Or, perhaps the plan you can afford isn’t likely to be popular amongst your employees. By offering either an ICHRA or QSEHRA, you’re able to give your employees a way to buy the plan they want and fund their accounts according to your budget. Integrated HRAs and EBHRAs give employers a way to help employees pay for out-of-pocket costs and can serve as a powerful recruitment tool. 
2. Greater cost savings and control over the type of health services you pay for. The IRS sets certain guidelines as to which types of expenses can be reimbursed for through an HRA but employers can choose to further restrict the types of health services and care they’ll reimburse for through the HRA. This can help control costs and ensure the coverage you offer is inline with your company values.
3. Offer health benefits to employees that don’t qualify for group coverage. The IRS allows employers to offer an ICHRA to specific classes of employees (as long as it’s offered to everyone in that employee class equally). This enables employers to give part time, hourly or other classes of employees, who might not qualify for the group health plan, a way to buy health insurance coverage.
4. Employees have more flexibility in the type of health insurance plan they choose. Both ICHRAs and QSEHRAs allow employees to use the money employers make available to buy the health insurance plan that most benefits them. Instead of being stuck with a group plan that isn’t exactly what they want.
5. A way to offer retirement benefits without the cost and risk of a 401k. Traditional retirement plans like 401(k)s can be [expensive](https://krc-pbpc.org/research_publication/retirement-gamble-the-problem-with-401k-plans/) and risky to manage, especially for small employers. But a Retiree Only HRA can allow companies to help former, retired employees to pay for Medicare and other health-related costs.
6. Employees are more likely to be healthier and less stressed. People who have a way to pay for health services are [more likely](https://health.gov/healthypeople/objectives-and-data/browse-objectives/health-care-access-and-quality/increase-proportion-people-health-insurance-ahs-01) to seek the treatment they need. They’re also less likely to feel financial stress. The healthier and less stressed people are, the more productive they are. By offering any of the HRAs available, employers can give their workforce a way to pay for health services and thus increase the likelihood that they will have a healthy and productive workforce.

Ensuring your benefits package is valuable to employees is essential for recruiting and retaining talent. But it’s also important to consider benefits that bring value to the company and flexibility to company operations. [Offering an HRA](https://livelyme.com/guides/hra-guide/) can serve both needs. While they provide a way for employees to pay for out-of-pocket medical expenses and can empower them to purchase the health plan that makes sense for them, HRAs also give companies options in terms of how they support their employees so they can do it in a way that makes sense for the business as well. 

If you are interested in offering your employees an [easy-to-use HRA](https://livelyme.com/hra/) with great customer service, [reach out to us](https://livelyme.com/contact-sales/) at Lively.

What Are the Benefits of Offering an HRA to My Employees?

It’s that time of year again, when 80% of Americans spend less than an hour researching one of the most important decisions they’ll make this year: their health coverage.  Unfortunately, this often leaves many people under-insured or without the right coverage for their needs.  To prevent this from happening to you, we have a few tips that’ll help you make the right decisions for you and your family this [open enrollment season](https://livelyme.com/guides/open-enrollment/).

## What is open enrollment?

[Open enrollment](https://livelyme.com/guides/open-enrollment/), simply put, is [a period of time, usually two-to-six weeks](https://livelyme.com/blog/why-do-open-enrollment-periods-exist-for-health-insurance/), when people can enroll in health insurance and other benefits for the next year. It most often occurs in the fall, but some employers have specific open enrollment periods, so if you are not sure when your company's open enrollment takes place, it's always a good idea to ask. Outside of open enrollment, you often are not able to change your health insurance coverage without a "qualifying life event," such as having a baby, getting married, or losing other health coverage.

## Common mistakes

Because researching healthcare options can feel like a chore, during open enrollment, roughly 90% of Americans choose the health plan they had the previous year, despite any changes in health. This lack of research and [preparation for open enrollment](https://livelyme.com/blog/five-tips-to-prepare-for-open-enrollment/) can leave them under-insured. In addition, individuals often don't look into how their plans may have changed, even if it has the same name, and often neglect the full range of benefits their insurance plan and employer offers. 

## Six tips to help you determine your benefits package

These simple, actionable tips will help you select the best benefits for you and your family.

## Review your family’s recent health history

To make sure you’re buying the right coverage for your family’s needs, you need to know what those needs are. Take a look at what your family’s medical needs have been over the last two years. Assess:
- How did your current plan support you?  
- Where did it fall short?  
Then ask yourself if you or a family member has been recently diagnosed with a condition that will require ongoing treatment.  If so, you’ll want to take that treatment into account when choosing a plan.

## Assess recent or near-future life changes

Are you [getting married](https://livelyme.com/blog/tag/are-married-getting-married/)? [Pregnant, wanting to get pregnant, or adtopting a child](https://livelyme.com/blog/life-events-that-can-change-your-healthcare-costs/)? Are you planning to move away from your preferred doctor and want to make sure you have access to another health provider you like? To make the right decision for your health coverage, you’ll want to anticipate how these future changes will affect your healthcare needs.

## Check your current plan

Plan names can stay the same but the benefits included within them could change. So even if you keep the same plan as you had last year, it could end up costing you more or less depending on what changes your employer or the plan provider made. Possible changes to look for are:

- Coverage levels
- Pricing
- Types of products offered
- New providers for existing products
- New products from existing providers

## See if premiums and deductibles have changed

Sometimes companies change the amount to which they’ll contribute to their employees’ health plans. If your company has changed its contribution levels, this will likely affect the amount you pay in premiums and deductibles. It might also affect the attractiveness of HSAs and FSAs in order to help with those deductibles.

## Do your own research

Your company will likely put out official communication regarding your benefits options and reviewing its resources is a good place to start.  But it’s not a place to end.  Many companies provide resources to help consumers make the right choices when it comes to their benefits. By doing your own research, you’re more likely to get a neutral third party assessment of your plan options, and you might even find better benefits in the marketplace than your company is offering.

If you do find better plans that you think your company should consider, try sending them to your Human Resources (HR) Department. When HR knows what employees need, they can make better choices in terms of what benefits they offer in the future.

## Check your company’s wellness initiatives

Companies have realized that a healthier workforce is a more productive workforce. To incentivize healthy behavior, many have started programs that reward such behavior with increased benefits like a [greater HSA](https://livelyme.com/guides/hsa-guide/) or 401(k) contribution, lower premiums, or other perks like reimbursement for gym memberships. Check with your HR Department to see if you might qualify for any increased benefits.

Navigating the healthcare labyrinth can feel like a job in and of itself.  But if you follow our six tips, you’re more likely to make the right decisions for your family and could end up saving money over the course of the year.

## Learn more with Lively

Lively is a modern, health savings account (HSA) that helps you save for routine and unexpected healthcare expenses and plan for retirement. To learn more, check out our [resources on healthcare and financial wellness](https://livelyme.com/resources/), including our [open enrollment guide](https://livelyme.com/guides/open-enrollment/), or see if an HSA is a [fit for you](https://livelyme.com/features/).

Select the right healthcare insurance benefits for your family. Picture shows doctor doing a checkup on a child with his mother holding him.

child and mother at a family doctor visit 

80% of Americans spend less than an hour researching their health coverage. Follow these tips so you can make the right decisions for you and your family.

Open Enrollment Tips for Employees | Lively

Open Enrollment Tips for Employees

Familiar with the tax-saving benefits of a health savings account (HSA), and wondering how you can extend those benefits to your family? While an HSA is owned by one person, there is a way to tap into those HSA funds for the rest of your family. Discover how, and the differences between a family HSA and individual HSA.

## Your plan is dependent on your health care coverage

To be [eligible to contribute to an HSA](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account), you must enroll in an eligible [High-Deductible Health Plan](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/) (HDHP). The IRS sets annual minium deductibles for individual and family health care coverage, as well as annual out-of-pocket maximums, and usually update those annually based on inflation.

## What is a Family HSA?

![what-is-family-hsa](//images.ctfassets.net/6j8y907dne6i/2AyTsX5zWqJw75Sf8dPxjn/27b942e17c0757642c853d85db8abfe4/what-is-family-hsa.jpg)

While often referred to as a “Family HSA” account, there is actually no such thing. 

Each HSA is owned by one person. But family coverage under a qualifying HDHP allows you to use your HSA to pay for [qualifying medical expenses](https://livelyme.com/whats-eligible/) for yourself and your family. The type of health plan (individual or family) you’re enrolled in decides how much you can contribute to your HSA account in one calendar year. 

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to [contribute the individual maximum contribution](https://livelyme.com/blog/hsa-contribution-limits/) amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the annual contribution limit set for families. One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s [tax return](https://www.irs.gov/irb/2004-02_IRB). 

## Annual HSA Contribution Limits

![hsa annual contribution limit](//images.ctfassets.net/6j8y907dne6i/3mripn4V4Q51N7FfM26AEf/283c4bf5ded5d8aefbf448ea77e7b317/hsa_annual_contribution_limit.jpg)

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to [contribute the individual maximum contribution](https://livelyme.com/blog/hsa-contribution-limits/) amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the [annual contribution limit set for families](https://livelyme.com/blog/hsa-contribution-limits/). 

One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s [tax return](https://www.irs.gov/irb/2004-02_IRB). 

If enrolled in an HSA-eligible HDHP, and at least 55 years old—or will be 55 any time in the calendar year—you can make an extra $1,000 contribution. This is a [“Catch-Up” Contribution](https://livelyme.com/blog/what-is-an-hsa-catch-up-contribution/). 

## Real-life examples
### Individual health plan with HSA

During open enrollment, James chooses an HDHP because he wants to take advantage of his employer’s contributions to an HSA. James is not currently married and doesn’t have any dependents, so his health plan will cover only him.

As an individual, James can contribute up to the individual annual [HSA contribution limit](https://livelyme.com/blog/hsa-contribution-limits/) without a penalty.

### Family Health Plan with HSA
Fast forward a few years, and James is now married with two children. James is at a different company, but still has his HSA and an HDHP that covers him and his family.

James is now eligible to contribute the family limit to his HSA, and while the contribution limits often change annually, he knows he'll be able to contribute up the the annual family [HSA contribution limit](https://livelyme.com/blog/hsa-contribution-limits/) within one calendar year.

## Can I Have a Joint HSA With My Spouse?
![no-joint-hsa-with-spouse](//images.ctfassets.net/6j8y907dne6i/4JyBNCLJUiCy6ietwyTrGn/588c28e6b0352282f87b6d0c6643cfe9/no-joint-hsa-with-spouse.jpg)

*Short answer:* No. An HSA is owned by one person. 

Yet, there is a way for you and your spouse to have HSAs of your own. If you and your spouse are covered under the same HDHP, you can each open your own HSA and contribute separately. But, the amount you and your spouse contribute, combined, cannot exceed the contribution limit for a family plan. 

### Real-life examples:

#### Family HSA contribution limit with two accounts

Jack and Diane are married and covered under Jack’s high-deductible health plan. Diane wants to take advantage of her employer’s HSA contributions, so she decides to open up an HSA of her own. 

However, Jack and Diane’s total, combined contributions cannot exceed the family contribution limit set for the IRS that year. That means that whatever Jack contributes to his HSA and whatever Diane contributes to her HSA added together needs less or equal to the annual contribution limit. 

Jack and Diane can use these funds to pay for the [qualified medical expenses](https://livelyme.com/whats-eligible/) of those covered under their health plan, including each other.

#### Family HSA contribution limit with one account

The other option is to have the entire amount of the HSA in one account holder’s name. In this case, Jack opts not to contribute anything into his HSA for the year, and Diane and her employer will be able to contribute the entire amount into her account.

## The benefits of an HSA

![hsa-retirement-benefits](//images.ctfassets.net/6j8y907dne6i/1okT5ICuYiKx6c18Oof9dK/0e331b4135f6588ed8df49e0f2a24bdd/hsa-retirement-benefits.jpg)

There are four primary [benefits of having an HSA](https://livelyme.com/blog/what-are-the-benefits-of-an-health-savings-account/).

1. __Three levels of tax savings__. Pre-tax or tax-deductible contributions. Tax-free interest, and investment earnings. And tax-free withdrawals when used for qualifying medical expenses.
2. __Portability__. HSAs aren’t tied to your employer. If you decide to move to a different company or retire, your HSA stays yours. The funds added to your account stay there until you choose to withdraw or roll it over; like a 401(k).
3. __ A safety net in the event of a health-related emergency__. An HSA helps you save for the unknown. It can be used for unexpected health care expenses or health insurance if you’re between jobs. An HSA covers all qualified medical expenses, even after a change of plans or providers.
4. __ Flexibility in retirement__. When you turn 65, your HSA can be used for non-health-related expenses without penalties; like a 401(k), or IRA.

An HSA is a great safety net in the event of a health-related emergency. And with [options to invest](https://livelyme.com/blog/can-i-invest-my-hsa-money/), choosing to open an HSA is one of the best financial choices you can make for you and your family. 

To learn more, or to open an HSA, [get in touch](https://livelyme.com/features/) with us at Lively.


family hsa and individual hsa contributions are dependent on health care coverage

family-hsa-vs-individual-hsa

Learn the differences between a Family HSA vs Individual HSA. And how to extend HSA benefits to your entire family. 

Family HSA vs Individual: What’s the Difference?

What’s the Difference between a Family and an Individual Health Savings Account?

Dividing your assets, such as 401(k)s and Health Savings Accounts (HSAs) is a central piece of negotiating a divorce settlement. If you receive health insurance through your spouse’s employer, you want to carefully consider whether it makes sense to stay on your partner’s health insurance after you divorce.

## Tips for navigating health insurance when divorcing

### You can pay for health insurance through an ex’s health insurance.

If your health insurance was through your partner’s workplace plan, you may be able to stay on the plan for up to 36 months. The federal COBRA legislation requires any firm or organization with at least 20 employees to offer health insurance to the divorced partner. If your soon-to-be-ex works for a smaller employer, you may be eligible for extended COBRA coverage through a state-run plan.

But there’s a big expensive catch to COBRA health insurance coverage: Once you are divorced, the employer no longer will subsidize the premium cost for the non-employee. 

You will be required to pay the full cost. According to the Kaiser Family Foundation, the average monthly premium for single coverage through a group plan was nearly $7,200 in 2019.  And the employer is also allowed to tack on an additional 2% annual fee to cover administrative charges.

### Check out your employer’s health insurance. 

If you were on your partner’s plan because it was more robust or cost-effective than the plan offered by your employer, time to circle back to your workplace plan. It may now be more cost-effective than staying on your ex’s plan through COBRA. 

Getting divorced is considered a [qualifying life event](https://livelyme.com/life-events-that-can-change-your-healthcare-costs), so you’ll be able to enroll for health insurance outside of open enrollment. 

### Compare COBRA coverage to an ACA-marketplace plan.

Before you finalize your divorce, spend some time pricing out purchasing your own health insurance through the ACA marketplace. Depending on your income you may be eligible for subsidies. You can start your search at the [healthcare.gov](https://www.healthcare.gov/) website.

### Include the cost of paying for health insurance in your divorce negotiations. 

It’s likely that whatever health insurance solution you land on, the premium is going to be a sizable line-item cost in your monthly budget. You should factor that into negotiations for assets. And keep in mind that if there is a family HSA account that has a sizable balance, that is a valuable asset to also bring into your discussions. 

### Consider a legal separation as a temporary step. 

If you are legally separated, but not divorced, you may be able to stay on a spouse’s plan, but it varies by employer and insurer.

### Sort out who pays for insurance coverage of the kids.

This is obviously a key part of your divorce negotiation. If you opt for joint custody and you both assume responsibility for health insurance, the spouse whose birthday falls earlier in the calendar year will have the “primary” insurance for the children. If there isn’t joint custody, the custodial parent typically assumes responsibility for health insurance for children. If the custodial parent remarries, and doesn’t have health insurance, the responsibility can fall to the custodial parent’s new spouse. If that isn’t an option the non-custodial parent will be required to step in and provide health insurance coverage.

Given the complexity of divorce, including health insurance coverage. consulting with a lawyer experienced in divorce law is a smart move to ensure that everyone in the family is covered. 



stay-on-insurance-divorce

Divorce is a complicated process - and it doesn't help that your health insurance gets tied up into the process as well. We detail some information that you will need to know regarding your healthcare if you are getting divorced from your partner.

How Long Can I Stay on My Partner's Insurance After a Divorce? 

<p>Helping employees understand the benefits of an HSA (like any new HSA user), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.</p>
<p></p>
<p>Our employee HSA education guide will help you get HSA strategies&nbsp;in place from day 1 so employees can take advantage of the&nbsp;<a href="https://livelyme.com/what-are-the-benefits-of-an-health-savings-account/">triple-tax benefits</a>&nbsp;immediately.</p>
<h2>HSA Employee Education Tips</h2>
<p>Opening, establishing and contributing to an HSA should be easy.&nbsp;It shouldn&#8217;t be rocket science, that&#8217;s at least what we think at Lively! Here is what every employee needs to know to get started with their new HSA:</p>
<ol>
<li>Confirm&nbsp;<a href="https://livelyme.com/hsa-eligibility-details/">HSA-Eligibility</a></li>
<li>Understand&nbsp;<a href="https://livelyme.com/2018-hsa-contributions/">Contributions&nbsp;Limits</a></li>
<li><a href="https://livelyme.com/add-1-hsa-day-1/">Open and Establish their HSA</a></li>
<li>How to&nbsp;<a href="https://livelyme.com/hsa-rollovers-and-transfers/">Rollover or&nbsp;Transfer</a>&nbsp;an Existing HSA</li>
<li><a href="https://livelyme.com/set-forget-hsa/">Automating HSA Contributions</a></li>
<li>Use an HSA&nbsp;<a href="https://livelyme.com/hsa-debit-card/">Debit Card</a>&nbsp;for Eligible&nbsp;Purchases</li>
<li>Review&nbsp;<a href="https://livelyme.com/can-i-invest-my-hsa-money/">HSA Investment</a>&nbsp;Options</li>
</ol>
<p>No employer health or financial situation is the same. Once employees have opened&nbsp;an HSA, customizing&nbsp;HSA strategies can help each and every eligible employee take advantage of their HSA benefits. This will better ensure success (and renewal). Let&#8217;s look at two likely employee HSA scenarios:</p>
<ul>
<li><b>HSA Saver</b>&nbsp;&#8211; HSA savers are more focused on the long-term savings value of an HSA. They can invest their funds or simply take advantage of FDIC-Insured interest bearing&nbsp;HSA accounts. Thereby taking advantage of compound interest and save HSA funds for future health costs.</li>
<li><b>HSA Spender</b>&nbsp;&#8211; These employees are using pre-tax HSA funds to pay for expected and unexpected health costs. They can use their dedicated HSA funds to reduce their out-of-pocket health expense liability.</li>
</ul>
<p>Many HSA account holders are a mix of both. Helping employees save for health costs today and plan for anticipated health costs well into retirement will only increase HSA adoption.</p>
<h4>Employee Engagement and Support</h4>
<p>Things come up. Employees get stuck. We get it. We have&nbsp;been through it ourselves. Making sure on-demand support options are available for employees is crucial in this process. It saves everyone time. Employee HSA education is an ongoing process. So we created an on-demand resource center to help &#8211; from an&nbsp;<a href="http://support.livelyme.com/">HSA FAQs</a>&nbsp;to&nbsp;<a href="https://livelyme.com/calculator/">HSA saving calculators</a>. We backed it all up with a dedicated&nbsp;customer&nbsp;service team to answer employee&nbsp;questions via&nbsp;<a href="mailto:support@livelyme.com">email,</a>&nbsp;<a href="tel:1-888-576-4837">phone</a>&nbsp;or chat (via our website).</p>
<h4>Don&#8217;t&nbsp;Forget! Talk About Retirement &amp; Health Costs</h4>
<p>Many employees are stuck on a year-to-year&nbsp;ferris&nbsp;wheel when it comes to health insurance and cost planning. Employees are forced into rising yearly health insurance premiums and out-of-pocket costs. Not planning for health costs in retirement &#8211; which are&nbsp;<a href="https://www.cnbc.com/2017/11/24/health-care-costs-in-retirement-can-top-275000.html">expected to exceed&nbsp;$275,000 per couple</a>&nbsp;&#8211; can be a financial mistake. Employees can use their HSA to plan and save for retirement. In fact, an HSA might be the&nbsp;<a href="https://livelyme.com/stealth-ira/">new stealth IRA</a>.</p>
<p>Opening an HSA is easy (at least at Lively). Helping employees understand the value of an HSA should be too. Use this employee HSA guide&nbsp;to fast-track benefits education to save employees time.</p>

Employee-HSA-Guide.jpg

Helping employees understand the benefits of an HSA (like any new HSA users), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.

Employee HSA Guide

Lively Blog

What is an HSA?

How Do I Qualify for an HSA?

How Does a Health Savings Account Work?

How Much Can I Contribute to My HSA?

What Can I Use a Health Savings Account For?

It’s a fact. The cost to be - and stay - healthy rises each year. And even the comprehensive  (expensive) health insurance plans are covering less for the cost of care. So what’s a person to do? Open an HSA.

A Health Savings Account (HSA) allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. You, your employer, and even friends and family can contribute money to your HSA. The contributions are tax-deductible and never expire. So you can save them for a rainy day, retirement, or to help pay for an expensive procedure you have coming up.

## How do I qualify for an HSA?

To qualify for opening and contributing to an HSA, you must meet these criteria:

1. You must enroll in a [High-Deductible Health Plan](https://livelyme.com/guides/hdhp/) (HDHP). 
2. You have no other health coverage except what is permitted under what the IRS defines as "[other health coverage](https://www.irs.gov/publications/p969#en_US_2022_publink1000204039)."
3. You must not be enrolled in Medicare.
4. You can’t contribute to a [Health Flexible Spending Account](https://livelyme.com/blog/what-is-a-healthcare-fsa/) (HFSA). But you can contribute to a [Dependent Care](https://livelyme.com/blog/dependent-care-fsa-dcfsa-work/) (DCFSA) or [Limited-Purpose FSA](https://livelyme.com/blog/what-is-a-limited-purpose-fsa/) (LPFSA) and contribute to a health savings account in the same year.
5. You can't be claimed as a dependent on someone else's tax return.

## How to enroll and use an HSA

![how-does-health-savings-account-work](//images.ctfassets.net/6j8y907dne6i/3zynuAFE9SoOfJRy8MT7lO/d0078bf16189f8141aeeaa5b7ae1da54/how-does-health-savings-account-work.jpg)

### Step 1: Elect a high-deductible health plan during open enrollment.

![Infographic High Deductible Health Plan plus HSA how you save](//images.contentful.com/6j8y907dne6i/5lcCeg9CA7pfdV9jfLrUVG/86661d1a0187b5c1f8408c52a5247e9f/Infographic_HealthPlan_plus_HSA_HORIZ.png)

### Step 2: Open a health savings account and decide how much you want to contribute. 

To enroll in an employer-sponsored health savings account, you'll likely open your HSA during open enrollment. Let your employer know how much you want to contribute for the year up to the [IRS contribution limit](https://livelyme.com/blog/hsa-contribution-limits/), which are different whether you are an individual, family, and/or over 55. Your employer may begin making payroll deductions each month.

Your employer may choose to contribute to your HSA. But they’re not required to. If they do, those contributions will count toward your annual limit. But will remain tax-free to you.

![Infographic how money goes into your HSA](//images.contentful.com/6j8y907dne6i/5qd6V0TtmmbBHgwTvMuTHh/f26f8ca95dd89fa960804adbe80616d6/Infographic_Money_In_HORIZ.png)

Maybe your employer doesn’t offer a health savings account. Or it’s outside of open enrollment and you want to get started on saving for your health care costs today. You can open an HSA with a financial institution in the private market.

With this route, you will make arrangements to fund your HSA with the account administrator. And your contributions will be deducted from your gross taxable income when you pay taxes for that year.

### Step 3: Use your funds for qualified medical expenses.

To use your funds, your account administrator may provide a debit card so you can pay for your health care costs at the point of sale. Or you will pay for costs upfront and submit documentation for [reimbursement](https://livelyme.com/blog/hsa-reimbursement-rules/). Your withdrawals are tax-free as long as you use the money to pay for qualified medical expenses. If you use your money for something else, the money you withdrew will be subject to income tax plus a 20% penalty.

![HSA infographic how money comes out of HSA](//images.ctfassets.net/6j8y907dne6i/4ASMR4GJB8EGJoXPtGWqLj/d6a2d0cf2f363b57abaa037e62026a55/Infographic_Money_Out_HORIZ.png)

__Additional health savings account details:__

- You own your account so you can take it with you from employer-to-employer (or employer to unemployed). 
- Even if you choose a health insurance plan that isn’t an HDHP, you can still use past contributions for out-of-pocket, qualified medical expenses. But you won’t be able to contribute to your account.
- Employer contributions are tax-free.
- If you’re under the age of 65, you must use your contributions for qualified medical expenses.
- Once you reach 65, you can no longer contribute to your account. But you can use your savings to pay for whatever you’d like.  
- An HSA offers triple tax savings: pre-tax or tax-deductible contributions, tax-free interest and investment earnings, and tax-free distributions when used for qualified medical expenses.

## What can I use my funds for?

![hsa-eligible-expenses](//images.ctfassets.net/6j8y907dne6i/42Oe00AuAcE2fs9KFkcmHS/b30013424117eb2a8c42b7c42b094e5c/hsa-eligible-expenses.jpg)

HSA-eligible expenses include (but are not limited to):

- Deductibles
- Copays
- Coinsurance
- Out-of-pocket costs related to diagnostic services like x-rays and blood tests
- Prescriptions
- Quality of life enhancers like air purifiers (with a letter of medical need)
- Medical supplies like band-aids and crutches
- Alternative medicine treatments like acupuncture

This list is not exhaustive. For a comprehensive list of IRS-qualified medical expenses check [“What’s Eligible."](https://livelyme.com/whats-eligible/)

## What happens if I switch employers?

You get to keep your account and every dollar you’ve saved. Although you may not be able to continue contributing to that same account. 

If your new employer uses a different health savings account administrator, you will have two options. [Roll the HSA](https://livelyme.com/blog/rolling-over-your-hsa/) from your previous employer into the new account or maintain two different HSAs. One account from your previous employer - from which you can withdraw but not contribute. And one from your current employer into which you can start contributing.

For more details about your specific situation, contact your HR department.

## Where can I sign up for a Health Savings Account?

![sign-up-lively-hsa](//images.ctfassets.net/6j8y907dne6i/4sUTWDriKFMgGBrIHxeyH9/a36ee79d497005f21445666727ab98e6/sign-up-lively-hsa.jpg)

You can [sign up for an HSA](https://secure.livelyme.com/signup/start) in two places. Through your employer, if it offers this benefit. Or through a financial institution in the private market.

Here, at [Lively](https://livelyme.com/), we offer a private-market HSA that allows you to put your contributions into mutual funds or other investments. That way you can access an even greater benefit: growing your money with the market.

As you can see, there are many ways an HSA can help you save money for health care expenses and retirement. A health savings account can also offer security should you lose your health insurance coverage for a period of time. For more information about HSAs, check out our [HSA Guide](https://livelyme.com/guides/hsa-guide/).


what-is-hsa

Learn the basics of an HSA, including the qualifications for opening and contributing to an account, how much you can contribute, how to use your account, and more!

HSA Basics: Qualifications, Contributions, and More | Lively

The Basics of HSAs: Qualifications, Uses, and More

On May 16, 2023 the [Internal Revenue Service announced the HSA contribution limits for 2024](https://www.irs.gov/pub/irs-drop/rp-23-23.pdf). These are set each year and adjusted for inflation, and 2023 limits are significantly higher than those set for 2023.

For 2024 HSA-eligible account holders are allowed to contribute: 

- $4,150 for individual coverage
- $8,300 for family coverage

This is a $300 increase for individuals and a $550 increase for families from the [2023 HSA contribution limits](https://www.irs.gov/pub/irs-drop/rp-22-24.pdf).

The 2023 HSA contribution limits are: 
- $3,850 for individual coverage
- $7,750 for family coverage

If you are 55 years or older, you’re still eligible to contribute an extra [$1,000 catch-up contribution](https://livelyme.com/blog/what-is-an-hsa-catch-up-contribution/).

To be eligible for an HSA, your health plan has to meet the following IRS criteria for a [high-deductible health plan (HDHP)](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/):

__For 2024:__
- Must have a minimum deductible of $1,600 for individual coverage, and $3,200 for family coverage
- Out-of-pocket maximums cannot exceed $8,050 for individual coverage and $16,100 for family coverage

__For 2023: __
- Must have a minimum deductible of $1,500 for individual coverage, and $3,000 for family coverage
- Out-of-pocket maximums cannot exceed $7,500 for individual coverage and $15,000 for family coverage

Annual minimum deductibles have increased $100 for individuals and $200 for families from 2023, and out-of-pocket limits have increased by $550 for individuals and $1,100 for families. 

You can [use our HSA contribution calculator](https://livelyme.com/hsa-contribution-calculator/) to help figure out your optmial monthly contribution.

## How HSAs work

A [Health Savings Account (HSA)](https://livelyme.com/guides/hsa-guide/) is a tax-advantaged savings account. Think of it as a 401(k) for healthcare. In order to [contribute to an HSA](https://livelyme.com/partners/how-to-open-an-hsa/), you must have a high-deductible health plan. 

HSAs allow for tax-deductible contributions, tax-free interest and tax-free withdrawals for qualified medical expenses. This means the money you contribute to an HSA can be used tax-free on health expenses such as prescriptions, copays, and more. This can help you minimize your health care costs throughout the year while saving for the future.

If you choose a high-deductible health insurance plan through an employer, you are likely eligible to contribute to an HSA. If this is the case, your employer can also help to contribute to your HSA before taxes, so you can receive extra savings until you reach the annual contribution limit. 

The main benefit of an HSA? It’s 100% yours. If you leave your job, you can take your HSA (and the funds that you contributed to it) with you. This is different from a [Flexible Spending Account (FSA)](https://livelyme.com/guides/flexible-spending-account-fsa/) in which the funds will get returned back to your employer. 

There are three different tax advantages you can get from your HSA:

- Tax-free contributions
- Tax-free spending for all [qualified medical expenses](https://livelyme.com/whats-eligible/)
- Tax-free growth

The result is the most tax-advantaged account on the market. 

To get started, see if you are [eligible for an HSA](https://livelyme.com/blog/hsa-eligibility-requirements/) or [sign-up](https://secure.livelyme.com/signup/start) for a free account. 


piggy bank on pink background

The IRS announced the 2024 HSA maximum contribution limits. $4,150 for individuals and $8,300 for families. Sign up for your health savings account with Lively today!

2023 and 2024 HSA Contribution Limits

2023 and 2024 HSA Maximum Contribution Limits

The ground shifted under employers as the pandemic caused many workers to reevaluate their values, their jobs, the companies they worked for and even their careers. We likely won’t know the full impact of the pandemic and The Great Resignation for years to come but even with continued economic uncertainty and a potential recession, one thing is clear: employees are demanding more from their employers. In fact, a study from Lively found that in the past year [84% of HR leaders increased benefits](https://livelyme.com/blog/report-employee-benefits-pulse-check/) to attract and retain employees facing a high employee turnover rate.

At the same time, employers have fewer resources and need to keep their budgets in-check while retaining and recruiting talent. They need benefits solutions that offer a bigger bang for the buck, and [80% of HR leaders](https://livelyme.com/blog/report-employee-benefits-pulse-check/) say that competitive financial benefits are more important than they were a year ago. That’s where Health Savings Accounts (HSAs) come in.

## A brief overview

[HSAs are personal savings accounts](https://livelyme.com/guides/hsa-guide/) participants can use to save pre-tax money to pay for [qualified medical expenses](https://livelyme.com/whats-eligible/). Money is contributed to the account tax-free, any interest earned on the money is tax-free and distributions made on eligible expenses are tax-free as well (that’s why HSAs are called triple tax-advantaged accounts). Account owners can choose to [invest their savings](https://livelyme.com/features/invest-your-lively-hsa/) so that they grow at the rate of the market or to keep it in a savings account earning interest. The money never expires and rolls over from year-to-year.

Another beneficial feature is that anyone can contribute to an employee’s HSA. That includes the employee themselves, their employer, their friends and their family. The only caveat is that the total of all contributions must not exceed the [IRS’s annual contribution limit](https://livelyme.com/blog/hsa-contribution-limits/) for that year.

These features make HSAs a good tool to help employees save for future medical expenses and [even retirement](https://livelyme.com/blog/hsas-for-retirement/) as the account functions as a traditional retirement account once the participant turns 65. The only exception is when the account holder uses their HSA to pay for qualified medical expenses as these distributions stay tax-free, even in retirement.

There are a few eligibility requirements for employees to contribute to an HSA:
1. They must be actively enrolled in a [High Deductible Health Plan (HDHP)](https://livelyme.com/guides/hdhp/) and that must be their only health insurance coverage.
2. They must be under the age of 65.
3. They must not qualify for Medicare.
4. They can’t be counted as a dependent on someone else’s taxes.

For these reasons, HSAs are popular among employees. And what’s even better is the same features that are popular, are also beneficial to employers. This makes HSAs a valuable benefit to offer. Let’s take a deeper look.

## Financial benefits

One of the qualities that makes HSAs so valuable to employers is the ability of this account type to lower their cost per employee. HSAs can lower companies' costs directly by encouraging employees to choose more affordable health insurance plans as well as indirectly by lowering the companies’ FICA obligation.

### Reduce the cost of health premiums

The financial benefits HSAs offer employers include the ability to reign in the cost of health insurance. In a recent survey, employers said they expected their spending on medical care to [rise 6% in 2023](https://www.fiercehealthcare.com/payers/employers-expect-healthcare-costs-rise-next-3-years#:~:text=U.S.%20employers%20expect%20healthcare%20costs,be%20over%20budget%20this%20year.), after increasing 5% in 2022. If you’re looking to contain the costs of your benefits package while still offering quality health insurance, consider an HDHP/HSA combination.

According to the [Kaiser Family Foundation (KFF)](https://www.kff.org/report-section/ehbs-2022-section-8-high-deductible-health-plans-with-savings-option/#:~:text=Five%20percent%20of%20covered%20workers,HSA%2Dqualified%20HDHPs%20in%202022), the average annual premium in 2022 for a family HDHP was $21,079, of which employers paid $15,891. Compare this to the average annual premium of $23,003 for a non-HDHP health plan, of which employers paid $16,893 and you can see that offering this type of plan can help you save $1,000 per employee that enrolls. 

A great way to incentivize employees to [enroll in the HDHP](https://livelyme.com/guides/hdhp/) is to pair it with an HSA and, if your budget allows, to offer an employer contribution. You can structure this contribution as a match or a flat amount for all employees who are actively contributing to their HSAs.

### Lower your company’s tax obligation

Since employee contributions to their HSAs are taken pre-tax, their gross taxable income is reduced. The less gross taxable income they have in their paycheck, the less FICA taxes you, as the employer, pays. This is why it’s important to not only offer an HSA, but strategize about how much, if any, you will contribute to employees’ accounts. It might be beneficial to contribute a small amount to encourage employees to enroll in the HDHP/HSA benefits combo, but not too much so that it disincentivizes them to contribute themselves. 

Just like with employees’ contributions, HSA contributions from employers are also tax-free.

To find out how much you can save on FICA taxes by offering an HSA, use our [FICA tax savings calculator](https://livelyme.com/payroll-tax-savings/). 

## Improved recruiting and employee retention

The estimated cost of annual turnover at a mid-sized company costs as much as [$7.5 million](https://www.finra.org/media-center/newsreleases/2021/large-number-americans-reported-financial-anxiety-and-stress-even) and depending on the employee, costs as much as 213% of their salary. Average turnover at all companies is currently about 18% per year. Many employers are left scrambling to adjust their retention and recruitment efforts. If you’re one of these employers, here’s what the experts say you can do to keep more top talent in the building:

1. Make sure your benefits are in line with the [labor market as a whole](https://www.shrm.org/hr-today/news/all-things-work/pages/what-employees-want.aspx), not just your industry. Workers, especially those at entry level will happily jump industries if it means earning a higher wage or receiving better benefits. Note: In 2020, 59% of employers offered an HDHP/HSA combo, compared to 50% of employers in 2016.
2. 88% of job seekers will weigh the chance of getting better health insurance benefits for a lower-paying job against lower-quality benefits at a higher paying job. 
3. Not all employees have the same needs so employers should offer a benefits package that allows for flexibility and personalization.
4. HSAs are popular. KFF found that 24% of all covered workers are enrolled in an HDHP/HSA combination.

To keep employees, you have to keep them happy and a good benefits package with popular, usable options that allow flexibility and personalization is one way to do that. HSAs help employers achieve this by:

1. Giving employees the flexibility to pay for the medical care they want with pre-tax money instead of paying a higher monthly premium for care they might not need.
2. Giving employees a tax-free opportunity to save for future medical costs.
3. Giving employees a tax-free way to augment their current retirement savings plan with an additional savings vehicle.
4. Giving employers an opportunity to show employees they’re invested in their employees’ financial and physical health and well-being. 
5. Giving employees a convenient way to use their savings with debit cards that can be used to pay for medical care at the point of purchase.

## More productive employees

Did you know that a [2013 Gallup study](https://www.stress.org/the-stress-productivity-shortfall) found that employees’ lack of engagement at work costs the U.S. economy $450-550 billion a year? And over 275 million working days are lost a year due to stress? 

In a recent survey, [FINRA](https://www.finra.org/media-center/newsreleases/2021/large-number-americans-reported-financial-anxiety-and-stress-even) found that workers, especially younger employees, are feeling more financial stress than ever before. In fact, 60% of respondents reported feeling financial stress because they’re worried about their futures, mounting medical bills, their lack of savings and the state of their physical health and that of their families.

So what does that have to do with you, the employer? Everything. First, researchers have found a causal link between happiness and productivity. Happier employees are [13% more productive](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3470734) on average than unhappy employees. Second, stress accounts for 7.2-11.3% of employee turnover annually. Which means the cost of turnover is $251-$14,492 per employee. 

And the employees who stay? Twenty percent of workers report spending at least five on-the-clock hours per week thinking about their stressors. If the employee works 40 hours a week and has an annual salary of $60,000, that’s $1,500 per employee per year in lost productivity.

So what can you, as an employer do? You can give your employees increased opportunities to save and augment those savings with contributions from the company. An HSA is a great way to do that. 

HSAs help alleviate financial stress because they allow participants to set aside money pre-tax to pay for medical expenses. Participants can invest these savings, allowing them to grow their safety net at the rate of the market and to improve their financial well-being. HSAs also help employees answer the question, “How am I going to pay for that?” when an emergency arises. The fact that HSAs can double as a retirement account is another valuable feature for plan participants and can add to their overall feeling of financial stability. 

Employers that contribute to their employees’ HSAs show their workers that they’re invested in them. That investment goes a long way toward making employees feel valued. Which makes them feel happier at work. Which leads to higher productivity. Stress is an insidious cause of lost productivity in the current work environment, but it doesn’t have to be. [An HSA can help](https://livelyme.com/guides/hsa-guide/).

## How to get started

If you’ve decided that offering employees an HSA is the way to go, you’ll want to talk with your benefits professional about how an HDHP/HSA combination fits into your current compensation package. You’ll want to decide which [HSA administrator](https://livelyme.com/) you want to use, as HSAs are health-plan agnostic, meaning they can be used with any qualifying health plan. Then you need to figure out how much (if any) you’re going to contribute to your employees’ accounts.

One thing to consider is that many HSA administrators require [employers](https://livelyme.com/employers/) to do a lot of the heavy lifting when it comes to operating the plan. Lively doesn’t. Once you’ve set up your plan, you simply invite your employees to participate and we take care of their onboarding and education. You’ll be able to manage the plan seamlessly from our clear and informative dashboard and there will be no hidden fees to contend with. If you run into trouble, we’re here to help. We’re your partner in offering the best benefits package possible for your company.

## Find out more about Lively today

If you’re ready to offer an HSA to your company, you can [get started](https://livelyme.com/employers/) or [reach out to our team](https://livelyme.com/employers/) to walk you through the process. 

Group of happy, multiracial employees sit around a conference table discussing business

HSA add employee value

Employers can find lots of value in health savings accounts. Find out the details here.

What’s the value of an HSA?

The Value of Health Savings Accounts

In a world of text, chat and email it can feel like everything is (or has) an acronym. Health insurance plans are no exception. You may have come across the acronym HDHP and are wondering "What is a High Deductible Health Plan (HDHP)?" Continue reading to learn how choosing an HDHP could benefit you. Provided it gives you the coverage you need.

To start, an HDHP is a health insurance plan defined by lower premiums and a higher deductible. But don't let "higher deductible" scare you off. Here are two reasons why an HDHP could make sense for you:

1. All preventative care is covered before the deductible, and
2. HDHPs are an affordable way to get the coverage you need without paying more for extras you may not need.

HDHPs are also the only health insurance option that can be paired with a Health Savings Account (HSA). An HSA can help pay for the high-deductible or to save money for future medical costs.

<iframe src="https://player.vimeo.com/video/377355900" width="640" height="360" frameborder="0" allow="autoplay; fullscreen" allowfullscreen></iframe>

## What is considered eligible?

Annually, the IRS redefines what it considers an HDHP (adjusting for inflation). In 2022, their parameters were a [health plan](https://livelyme.com/guides/hsa-guide/) with a deductible of at least $1,400 for an individual and $2,800 for a family. As well as out-of-pocket expenses that didn’t exceed $7,050 for an individual and $14,100 for a family.

In 2023, the minimum deductibles and out-of-pocket maximums will rise. For individuals the minimum deductible will be $1,500 for individuals and $3,000 for families. The maximum out-of-pocket limits will rise to $7,500 for an individual and $15,000 for a family.

There's one other qualifying characteristic of HDHPs. The individual pays for the cost of healthcare, up to the deductible, before insurance pays for services. The one caveat here is preventative care. All preventative care is covered before the deductible.

## How do they work?

![preventative-care-included-hdhp](//images.ctfassets.net/6j8y907dne6i/5j1glZm5E5y47Fi5eW2T2K/1ebc0d46beb92be8021d514656948957/preventative-care-included-hdhp.jpg)

HDHPs charge participants lower monthly premiums. This is in exchange for requiring higher deductibles and out-of-pocket maximums.

Choosing an HDHP could make sense if you don't need many health care items or services. Or if you only visit the doctor for preventative care. This is because you'll be spending less on your monthly [health insurance plan](https://livelyme.com/compare-health-insurance-plans/) premium. An HDHP could also make sense if you need more care. Here's why.

Because HDHPs have a higher deductible, the IRS allows you to [deposit pre-tax money into a savings account](https://livelyme.com/blog/what-is-an-hsa/) called an HSA or Health Savings Account. HSAs are tax-advantaged accounts because contributions are pre-tax.

![Infographic High Deductible Health Plan plus HSA how you save](//images.ctfassets.net/6j8y907dne6i/5lcCeg9CA7pfdV9jfLrUVG/86661d1a0187b5c1f8408c52a5247e9f/Infographic_HealthPlan_plus_HSA_HORIZ.png)

The distributions and any gains those contributions make can also be tax-free. That's as long as the contributions are used to pay down your deductible or to pay for other qualified medical expenses. Depending on your tax bracket, this could help you save up to 30% on medical expenses.

Where an HDHP could get you into trouble is if you suffer a catastrophic event that requires an expensive procedure or treatment. And you can’t afford the out-of-pocket maximum. Or if you have or develop a chronic condition that needs management.

__Decide which plan is right for you with our [Health Plan Comparison Calculator](https://livelyme.com/compare-health-insurance-plans/).__

To choose an HDHP, you would make the election during the open enrollment period for either your place of employment or in the private market. The other time is after a [Qualifying Life Event](https://livelyme.com/blog/when-should-i-consider-changing-my-health-plan/). If you’ve experienced a life event like the loss of health insurance, marriage, the birth of a child, or death of a dependent, you can sign up for an HDHP at any time during the year with a special enrollment period.

## What are the benefits?

![high-deductible-health-plans-lower-premium](//images.ctfassets.net/6j8y907dne6i/45YNFcVTSqOIH1GiPuzUVQ/150ddbbe5981bcf60c7150e50f13f6d1/high-deductible-health-plans-lower-premium.jpg)

Whether you’re considering an HDHP or have been using one for years, there’s no question that higher deductibles are a tough pill to swallow. The good news is, this type of health plan does offer some unique flexibility and opportunities that other health insurance plans lack.

1. __Flexibility__ – HMO health insurance plans require referrals from a primary care physician. This can be extremely frustrating for individuals who need to have some kind of care outside of a general practitioner. While HDHPs still have in and out of network designations, the list of in-network providers is extensive. And you can see a dermatologist, cardiologist, or other specialists even if you haven’t yet designated a primary care physician.
2. __Lower cost__ – The problem with large, overarching health plans is they try to cover everyone. This might sound good on paper, but not in practice. This often leads to people with low health care needs paying more to cover people with high health care needs. HDHPs reward limited use of the medical system by charging participants low monthly premiums. While also covering preventative care before the deductible is met.
3. __Health savings for the long term__ – HDHPs are the only health insurance plan that you can pair with an HSA. You own the contributions both you and your employer make to your HSA. And they never expire. The funds can be saved or invested in stocks and mutual funds, making these accounts function as a medical safety net. This is beneficial if you lose your employment or your employer changes your health insurance options. Or if your health insurance company decides to discontinue the plan you’re on, or you experience a catastrophic event. Any of which could leave you scrambling to cover unexpected medical expenses. And in the event you don’t spend your contributions before the age of 65, you can use that money, tax-free, for any expenses. Just like another retirement account. 

## Is this plan right for me?

![is-hdhp-right-for-me](//images.ctfassets.net/6j8y907dne6i/1lGHA7VDq1QmkbEHtrozbq/8ce9096c3149cd21eca124e9fb2a5cf3/is-hdhp-right-for-me.jpg)

*The right health insurance plan for you lies at the nexus of affordability and appropriate coverage.* You must be able to afford the monthly premium but also the annual out-of-pocket maximum in case you experience a catastrophic event.

The plan must also provide adequate coverage for your current medical needs. As well as those in the foreseeable future (e.g. having a baby, knee surgery, etc.). Inadequate coverage could cause your out-of-pocket expenses to get out of hand quickly.

So take a look at the specifics for the HDHP you’re being offered. Can you afford that monthly premium? If yes, then take a look at what procedures, treatments, and prescriptions are covered and at what levels. When taking coverage levels into account, can you afford the copays, co-insurance, and other out-of-pocket costs?

Do you have the ability to contribute even a small amount to an HSA? Something to remember about HSAs is the money is contributed pre-tax. That means you could end up saving up to 30% on medical expenses depending on your income taxes bracket.

If, after answering these questions, an HDHP looks like it makes financial sense, then it could be the right plan for you. If you have questions about your specific situation, you should always reach out to your HR department.

HDHPs are often thought of as an [affordable health insurance option](https://livelyme.com/guides/hdhp/), especially for the healthy or if you know you’ll exceed your out-of-pocket maximum. Combine an HDHP's monthly affordability with the option to pair the plan with an HSA, and you have an attractive setup. Not only for those who have limited medical care needs but those who can afford to contribute a little extra each month toward future costs and savings. 

discover "what is a high deductible health plan?"

what-is-a-high-deductible-health-plan

Discover how an HDHP works, its benefits, and if one is right for you. Pair your Lively HSA with a qualified high deductible health plan to start saving today.

Your Crash Course in High-Deductible Health Plans

Understanding High Deductible Health Plans

You’ve heard about HSAs and FSAs. And you think they are a good way to save money for and on medical expenses. And your employer offers both as part of its benefits plan. 

You’re in luck. You get to choose the option best suited to your needs. And yes, you do have to choose. Because you can’t contribute to an HSA and a Healthcare FSA at the same time. Let’s discover which account type will win in HSA versus FSA.

So how do you choose? To make the best decision for you and your family, consider the details of each account. And compare those to the realities of your family’s medical and financial needs.

## HSA vs. FSA Basics

There are some basic facts you need to know to understand the differences between FSAs and HSAs. 

To start, let's look at what these accounts have in common.

Health Savings Accounts (HSA) and Healthcare Flexible Spending Accounts (FSA) are pre-tax accounts. And are both used to pay for qualified, out-of-pocket medical expenses. These include, but aren’t limited to, copays, deductibles, coinsurance, and prescriptions. Because contributions are pre-tax, you can save up to 30% on those out-of-pocket expenses. Depending on your tax bracket.

How are HSAs and FSAs different? The [major difference](https://livelyme.com/blog/differences-between-hsa-vs-healthcare-fsa-infographic/) they have is that an FSA is an employer owned account that pays for short-term expenses. You must use up the FSA funds you contributed by the end of the year.

HSAs are individually owned, and you can use them for short-term expenses, or long-term savings, like retirement. In addition, account functionality and account holder requirements are different for the two account types. 

Let’s learn a little more about each account type.

## What is a Health Savings Account?

![how-to-choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/1JfvzE56bAaAExlGqDmfjd/eafd5bc19e833ef342e4349e4eb6f630/how-to-choose-between-hsa-fsa.jpg)

A Health Savings Account is a kind of savings account that allows you to [save for health care costs](https://livelyme.com/blog/what-is-an-hsa/). And reduce your taxable income. In other words, HSAs are individually owned, tax-advantaged medical savings accounts. You can open one as an individual or as part of a family plan. As long as you and your family are enrolled in an HSA-eligible [High Deductible Health Plan](https://livelyme.com/blog/what-is-a-high-deductible-health-plan-hdhp/) (HDHP).

### What’s considered an HSA-eligible health plan?

HDHPs are [health plans](https://livelyme.com/guides/hsa-guide#qualifying-for-an-hsa-account/) with a minimum deductible and maximum out-of-pocket expenses set by the IRS that differs for individuals and families.

The IRS adjusts its allowed annual [HSA contribution limits annually](https://livelyme.com/blog/hsa-contribution-limits/) for inflation, and has different limits for individual and family accounts. If you have a [mid-year change](https://livelyme.com/blog/hsa-contribution-limits-mid-year-changes/) – like moving from self-only coverage to family coverage, or vice versa, then your annual contribution limit becomes prorated.

### How does an HSA work?

When you open your HSA, you choose how much you’d like to contribute annually. Then, your employer will deduct the appropriate amount from each paycheck. Your employer may choose to also contribute to your account. But they’re not required to.

If they do contribute, those contributions will count toward your [maximum annual limit](https://livelyme.com/guides/hsa-guide#maximizing-your-savings). Choose your individual contribution amount carefully. And keep in mind that contributions are cumulative. Otherwise, you could end up going over the annual contribution limit.

If you’re under the age of 65, you must use your contributions to pay for qualified medical expenses. These include, but are not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://hsastore.com/SearchProducts.aspx?q=band+aid&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://hsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://hsastore.com/SearchProducts.aspx?q=braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

Want to see the full list of HSA-eligible expenses? Visit [What’s Eligible?](https://livelyme.com/whats-eligible/)

### How age affects HSA use and taxes

![age-affects-hsa-taxes](//images.ctfassets.net/6j8y907dne6i/1mxiaR9se6IhBYokKGgsdd/86de5569ecab00a84ae82f763e30789e/age-affects-hsa-taxes.jpg)

If you’re under the age of 65 and use your contributions for qualified medical expenses, those funds are not subject to federal income tax. But, your state tax liability for contributions depends on your state.

If you choose to use the money for something other than qualified medical expenses, you will incur a 20% tax penalty. And have to pay income taxes on the misused money. After age 65, you can use your health savings on anything you want provided income tax is paid on the amount of the non-qualified disbursement.

## What is a Flexible Spending Account (FSA)?

There is only one type of HSA, and its main use is to pay for qualified medical costs at any age. 

There are three types of FSAs: 

- [Healthcare FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/)
- [Dependent Care FSA](https://livelyme.com/blog/what-is-a-dependent-care-fsa/)
- [Limited Purpose FSA](https://livelyme.com/blog/what-is-a-limited-purpose-fsa/)

When people use the term “FSA,” they are most often talking about a [Healthcare FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/), which is a spending account your employer makes available to pay for qualified medical expenses with pre-tax dollars. HDependent Care FSAs are for qualified care expenses, like child or adult daycare. Limited Purpose FSAs are only used for qualified dental and vision expenses. 

The most important thing to remember is that you cannot contribute to a Healthcare FSA or Dependent Care FSA and an HSA at the same time. But you can have a Limited Purpose FSA and an HSA at the same time. 

### How does a Healthcare FSA work?

If you decide you would like to open an FSA, the good news is that you don’t have to purchase a specific health plan. In fact, you don’t have to purchase any health plan.

But you must elect to participate during your employer’s open enrollment period. Or within 30 days of starting employment if you begin your job mid-year. Then, you select the amount you would like to contribute to your account at that time. Your employer will then deduct the appropriate amount from each paycheck.

Your employer can choose to contribute to your FSA but is not required to do so. And their contributions don’t count toward your annual max. Unfortunately, you can’t change this election at any point outside of open enrollment. Unless you’ve experienced a [qualifying life event](https://www.healthcare.gov/glossary/qualifying-life-event/) like the birth of a child, death of a dependent, marriage, or divorce. 

![qualifying-life-event-fsa-contribution-amount](//images.ctfassets.net/6j8y907dne6i/td25GiIFP70vewqfrlrSD/751854829eee489fc8a0c81fddb11efb/qualifying-life-event-fsa-contribution-amount.jpg)

You also lose any unused money at the end of the year. Unless your employer offers either the option to [rollover a small amount of funds](https://livelyme.com/blog/fsa-contribution-limits/) to next year’s account or a 2.5 month grace period during which you can use leftover funds. So choose your contribution amount carefully.

Like with HSAs, the IRS imposes [an annual limit on FSA contributions](https://livelyme.com/blog/fsa-contribution-limits/) that adjusts annually for inflation. Unlike HSAs, FSAs are only opened on an individual basis, so there are no “family plan” increases for annual contribution limits. But if both you and your spouse are offered the opportunity to take part in an FSA at work, you can do so and each can contribute up to the maximum allowed amount.

FSA funds can be used to pay for out-of-pocket medical, vision, and dental expenses not covered by your health insurance plan. Including, but not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://fsastore.com/SearchProducts.aspx?q=bandages&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://fsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://fsastore.com/SearchProducts.aspx?q=joint%20braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

For a full list of medical expenses that you can use your FSA (or HSA funds) on, check out [Publication 502](https://www.irs.gov/forms-pubs/about-publication-502) from the IRS. You can also visit the [FSA Store](https://fsastore.com/?utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner).

## The differences between HSAs and FSAs

![choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/EqKcpDQS9JGMip8psYcVj/994cea7acae40c6fc14eecff7688fdfc/choose-between-hsa-fsa.jpg)

### Eligibilty requirements

- __FSA:__ Only employers can establish an FSA plan for employees to contribute. Employees can open an FSA regardless of if they have a HDHP or not. Self-employed individuals cannot open an account.
- __HSA:__ Employees are eligible only if they have an [HSA-eligible HDHP](https://livelyme.com/guides/hsa-guide#qualifying-for-an-hsa-account). Individuals are not dependent upon their employer to offer an HSA. And an HSA can be opened from the private market. Self-employed individuals can open an account.

### Contribution sources and changes

- __FSA:__ The contribution amount is chosen during open enrollment or at the time of a qualifying life event. And the contribution amount can not be changed outside of these two time periods.
- __HSA:__ You can change your contribution amount at any time, no major life event required. This gives you the flexibility to increase or decrease your contribution at any time. *__Multiple contribution sources:__* You can grow your HSA in multiple ways. Not only can you add money to your HSA, but your employer, relatives, or anyone who would like to contribute can help your HSA grow.

### Rollover rules

- __FSA:__ Employers choose whether an employee can keep their unused funds or not. There are [three options](https://livelyme.com/blog/fsa-rollover-versus-grace-period/): *__Forfeit__*: Employee forfeits money, and employers get to keep it. *__Grace period__*: Employee has a 2.5 month grace period after the plan year ends to use on expenses. Any remaining money after the grace period is employer’s. *__Carryover__*: Employees can add a small amount of unsued funds, [set each year by the IRS](https://livelyme.com/blog/fsa-contribution-limits/) (in addition to contribution limit). Employers decide the carryover limit, and any funds over the limit are the employer’s.
- __HSA:__ Funds do not expire from year-to-year. Rollover money is in addition to the contribution limits. Money in your HSA can be carried with you and is available even if you change health insurance plans, get a new job, or retire. And funds left in your account grow tax-free through interest or any investment gains.

### Account ownership

- __FSA__: An FSA is owned by the employer. Unused funds belong to employers, not the employee.
- __HSA__: Funds stay with you. One of the best perks of an HSA is that the money you save always stays with you because you own the account. If money is left in your HSA at the end of the year, it stays put. No scrambling around trying to find ways to spend the money before the timer runs out.

### Access to money

![accessing-hsa-fsa-contributions](//images.ctfassets.net/6j8y907dne6i/4lJ6EN6128M5SHmAuh8hzk/60301225072d2cec1be8a6e2fda926ca/accessing-hsa-fsa-contributions.jpg)

- __FSA:__ Money available from day one. Every penny you contribute to your FSA is available at the beginning of the benefit year. Or shortly after the first contribution is made. Say you add $2,000 to your FSA for the year, you’ll likely contribute about $80 per paycheck. Yet, the entire $2,000 is available to use at any time even though you only make small contributions during the year. Another perk? If you leave a position before the year is over, the money spent from your FSA doesn’t have to be paid back.
- __HSA:__ As the employee contributes to their plan. An employee only has access to what has actually been deposited into their HSA account.

### HSA: A savings asset

- *__After the age of 65, your HSA functions like any other retirement account.__* And you can use your HSA money on anything you wish. How does it differ from other retirement accounts? You don’t pay income taxes on money used for medical expenses. You do, however pay income taxes on money used for anything else.
- *__HSAs are assets you can pass on to your kin:__* If your spouse inherits the HSA, it retains its status as a retirement-like account. With the same rules and allowances as it had when you were the account holder. If you pass it on to someone other than your spouse, it stops being an HSA, and inheritance laws apply.

## Understand the pros and cons to find what’s best for you

![is-hsa-fsa-better](//images.ctfassets.net/6j8y907dne6i/7dkm3u9Ez0B7z6r7ZndKdK/d746299a286d54387aae669880b9cbb2/is-hsa-fsa-better.jpg)

While it’s likely you’ll only be eligible for either a Healthcare FSA or an HSA, it is still a good idea to take a look at the pros and cons of both types of accounts. This can help you understand how they align with your greater financial goals and help you decide what healthplan to choose.

### HSA Advantages

- __Portable account__: means you own the account and don’t lose it if you change jobs
- __Triple-tax advantage__: Contribute funds pre-tax, funds grow pre-tax, withdraw funds pre-tax for qualified expenses
- __No use-it-or-lose-it rules__: Spend now or save for retirement.
- __Anybody can contribute to your HSA__: This includes your employer, spouse, family, or friends, as long as you don’t go over the annual contribution limit.

### HSA Disadvantages

- Must enroll in a HDHP and meet other qualifications to have one
- May be subject to fees from the provider
- If you use your HSA for non-qualified expenses over age 65 you'll owe an additional 20% tax penalty on top of any taxes due

### Healthcare FSA Advantages

- __Double tax savings__: Contribute funds pre-tax, withdraw funds pre-tax for qualified expenses
- __Health plan agnostic__: Can enroll in one if your employer offers it, do not need to have a specific type of health insurance plan

### Healthcare FSA Disadvantages

- Only available from an employer, can’t have one if you are self-employed
- Employer owned, means you lose the account if you change jobs
- Subject to use-it-or-lose-it rules, meaning you lose funds if you they are not used during the plan year

## Align Your Goals with Your Savings

Deciding between an HSA and FSA depends on your medical and financial needs. The principal requirement for an HSA is enrollment in an HDHP. And while preventative care is covered before the deductible under HDHPs, most other care is not. That means you will have to pay for your medical expenses for you and your family out-of-pocket until you reach your deductible.

An HSA-eligible HDHP makes the most sense in two cases. First, [if you or one of your family members](https://livelyme.com/features/) has a condition that needs managing by either a specialist or with speciality prescriptions or treatments. In this case, you’ll likely exceed the deductible and be able to use HSA funds to save up 30% on out-of-pocket medical costs.

Secondly, if you rarely use the medical system except for routine preventative care (that includes vaccines and well visits for children) and really want the ability to use your pre-tax account as an investment vehicle to save for retirement. Then, an HSA/HDHP arrangement may be the best choice for you.

To make the best decision for you and your family, start by assessing your past medical needs and those you can project. Then take a look at your finances. Choose the account and health insurance plan arrangement that sits at the nexus of best health coverage and account flexibility.

comparing hsa versus fsa

An HSA and FSA provide up to 30% savings on out-of-pocket healthcare expenses, but you can’t contribute to both. Let’s explore the pros and cons of each account.

HSA vs. FSA: How Do They Compare?

What is the Difference Between a Flexible Spending Account and a Health Savings Account?

Finding the right health insurance plan for you can feel daunting. One of the questions you may be considering is whether you should get an HSA or PPO. The good news is that you might not have to choose at all. Here’s what you need to know about both and how you can utilize them to maximize your health savings.

## HSA vs PPO: Why not both?

Before we get into the details of each option, let’s clear something up. A Health Savings Account (HSA) is a [tax-advantaged account](https://livelyme.com/guides/hsa-guide/) that allows you to save for qualified medical expenses — it’s not a health insurance plan. 

On the other hand, a preferred provider organization (PPO) is a type of health insurance plan that provides access to health care in a certain way. 

In fact, you [can have a PPO plan and an HSA](https://livelyme.com/blog/can-an-hdhp-be-a-ppo/) at the same time. Here’s how they both work.

### Preferred Provider Organizations

A PPO refers to the network coverage your health plan gives you access to. If you get your healthcare with providers who are in the network of your healthcare plan, you pay less for healthcare than with providers outside the network. However, you may still get some coverage with out-of-network providers. 

One major benefit of a PPO is that you don’t have to get a referral from your primary care physician to visit with a specialist. Simply check if they’re in your plan’s network and book an appointment with them directly. 

The biggest competitor to PPOs are [HMOs (health maintenance organizations)](https://livelyme.com/blog/hmo-vs-hdhp/), which allow you to coordinate your healthcare with your primary care physician, but at the cost of having access to a smaller network of providers.

### Health Savings Accounts

An HSA is a type of health savings plan that allows you to set aside money to pay for medical costs, up to a [maximum each year](https://livelyme.com/blog/hsa-contribution-limits/) which is set by the IRS.

Contributions to an HSA are tax-deductible, and your earnings in the account grow tax-free. As long as you use the funds for eligible medical expenses, those distributions are tax-free, too — that’s what the experts call a triple tax advantage.

To be eligible to contribute to an HSA, you have to have a [high-deductible health plan (HDHP)](https://livelyme.com/guides/hdhp/), which has a deductible and out-of-pocket maximum that are higher than traditional health plans. In exchange, they charge lower monthly premiums. 

### Can you get an HSA on a PPO plan?

In a lot of the information you may find online, it can sound like HDHPs, PPOs and HMOs are all separate types of health plans. But [HDHPs are defined only by their deductibles and out-of-pocket maximums](https://livelyme.com/guides/hdhp/) and have nothing to do with your network of providers.

In fact, the beauty of all of it is that it’s possible for an HDHP to be on a PPO network. That’s not to say the two are synonymous, though. Many PPO plans have low deductibles and out-of-pocket maximums, which are usually paired with higher premiums. 

Because this can get confusing, we’ll use the term “typical plan” or “traditional plan” to refer to the low- deductible, high-premium plans you can get on a PPO or HMO network, and we’ll use HDHPs for HSA-eligible plans that you can also get on both networks.

Now, with that out of the way, let’s get to the heart of the matter. The question isn’t whether an HSA is better than a PPO. The question is really whether you want an HDHP that qualifies for an HSA or a low-deductible plan?

## What is an HDHP?

As previously discussed, a high-deductible health plan is one where you have higher deductibles and out-of-pocket maximums than traditional plans, but also lower premiums. 

The limits are [determined each year by the IRS](https://livelyme.com/guides/hdhp/). These figures are sometimes much higher than what you’ll find with a traditional health plan. But the option to contribute to an HSA helps soften the blow a bit, especially if you have a high income and can benefit greatly from the tax breaks HSAs provide.

An HDHP can also be a good choice if you don’t have a history of needing medical care often. While there is a risk of ending up with a higher payment in some circumstances, you’ll have the certainty of lower monthly payments.

## What do traditional PPO and HMO plans offer?

These traditional plans charge higher premiums than HSA-eligible plans, but they also have lower deductibles and out-of-pocket maximums. In fact, some PPO and HMO plans have no deductible at all. They’re great if regular office visits are part of your health regimen.

The difference between a PPO and an HMO is how the provider network works. With an HMO, you’ll deal with your primary doctor most of the time and need to get a referral if you want to see a specialist. A PPO, on the other hand, gives you options to see other doctors and specialists without needing to go through your primary care physician.

## Why should you get an HDHP?

The biggest benefit of an HDHP is that it gives you the option to contribute to an HSA. To give you an idea of the potential savings, let’s say you have a family plan and can contribute $7,200 this year. 

If your effective tax rate for the year is 15%, that contribution cut $1,080 off your tax bill for the year — of course, as long as you don’t use your HSA funds for ineligible expenses.

In addition to saving for upcoming health care costs, you can also use an HSA to save for retirement. Health care is one of the [most expensive aspects of retirement](https://livelyme.com/blog/retiring-how-much-you-will-actually-need-healthcare/), and is estimated to cost an average couple $300,000 to $400,000 to pay for it.

Even if you don’t want to use your HSA for medical expenses in retirement, you can take withdrawals without the typical 20% tax penalty once you reach age 65. That said, the distributions will be subject to income taxes.

HDHPs can also be good if you’re young or generally healthy and don’t expect to spend a lot on medical care throughout the year. Of course, there’s no guarantee you won’t need an expensive procedure or visit to the emergency room. 

Even with most doctor visits, you have to pay the full bill before your insurance coverage kicks in. As a result, HDHP plans are best if your risk tolerance is high. 

## Why should you get a traditional PPO or HMO plan?

A traditional health plan won’t give you access to an HSA. But it can be great if you expect to make regular doctor visits or to get medication frequently throughout the year.

Their lower deductibles mean you’ll hit your limit sooner, and your insurance coverage will kick in earlier. For instance, they’re great if you’re pregnant as you’ll be doing regular check-ups with your doctor while you’re expecting.

Also, it’s possible to get access to a Flexible Spending Account (FSA) with a traditional health plan. FSAs are [another type of health savings plan](https://livelyme.com/blog/hsas-vs-fsas/), but you can only contribute to one if your employer offers it as a benefit. 

FSAs have some of the same benefits as HSAs, including pre-tax contributions (not the same as deductible contributions, but it’s the same concept). Also, when you designate how much you want to contribute over the next plan year, you’ll receive that amount at the beginning of the year instead of waiting to build up the balance through your payroll deductions. 

The biggest drawback of an FSA is its use-it-or-lose-it provision. This means that if you don’t use all of the money you contributed during the plan year, you could lose the remaining balance. 

Employers are allowed to make some exceptions, such as giving you more time to incur qualified expenses or allowing you to carry over some of the balance into the new year. But that’s not guaranteed.

Also, your FSA stays with your employer, so if you get laid off or move to another employer, you lose the money you’ve saved.

## Pros and cons of HDHP plans

Before you pull the trigger on a new health insurance plan, it’s important to understand both the benefits and drawbacks. Here’s a summary of what you need to know about HDHPs. 

### Pros of HDHP plans
- You’ll pay lower premiums than with traditional plans.
- You can contribute to an HSA and enjoy the tax benefits.
- HSAs don’t have a use-it-or-lose-it provision like FSAs.
- HDHPs can also be PPOs and HMOs, giving you more flexibility with your options.

### Cons of HDHP plans
- Deductibles can be high, which can be a colossal financial setback if you’re unprepared.
- Even simple doctor visits can be a major expense, especially if they include tests and screenings.
- You may find it difficult to contribute to an HSA if your out-of-pocket expenses are high every month.

## Frequently asked questions

### Can I have an HSA and a PPO?

Yes! In fact, many HSA-eligible health care plans are part of PPO networks. However, not all PPO plans are HSA eligible. Check if your plan allows you to have an HSA when shopping around.

### Is it better to have an HSA or a PPO?

If you’ve come across this question online, it’s important to note that it’s misleading. HSAs are a form of savings account that you can get with some healthcare plans. PPOs refer to the network your health insurance gives you access to.

But people tend to associate HSAs with HDHPs. And they associate PPOs with low deductible plans. The truth is that you can get a PPO plan that’s also an HDHP and, therefore, eligible for an HSA.

Hence the correct question is: Is it better to have a high-deductible or low-deductible health plan? The answer: it depends. It depends on your risk tolerance, how often you expect to visit the doctor, and how much you can afford to save up.

For instance, if you’re young and healthy and don’t expect a lot of doctor visits, an HDHP is an excellent way to save on monthly premiums. It’s also important to consider how much you can actually contribute to an HSA, which determines your tax benefits.

On the flip side, if you’re older, pregnant or have pre-existing medical conditions that require you to need regular check-ups, a traditional health plan may be a better fit, even with higher premiums. 

Finally, just because you’re young and healthy, it doesn’t mean you won’t max out your deductible or out-of-pocket maximum. You’re essentially betting that you won’t have to spend more on out-of-pocket costs than what you’re saving by not choosing a traditional plan. As such, HDHPs are better for folks with high risk tolerance. 

### What’s the difference between HRA and HSA health insurance?

An [HRA (Health Reimbursement Arrangement)](https://livelyme.com/blog/what-is-an-hra/) has a similar premise to an HSA. It’s a savings account that you can use to reimburse medical expenses. The big difference is that HRAs are only available through an employer, and only your employer can make contributions. 

In contrast, an HSA belongs to you, and you, your employer or anyone else can make a contribution. Also, HSAs are portable, so you don’t have to worry about losing anything if you leave your company.

With an HRA, if you leave your employer, you lose access to that money because it never really belonged to you.

### What’s better, an HSA or an HRA?

Like most things in life, it depends. It depends on you and your needs. HRAs and HSAs also have different benefits for employers and employees.

If you’re an employer, [advantages of an HRA](https://livelyme.com/blog/what-is-an-integrated-standard-hra/) include:
- Tax advantages.
- You can integrate them with FSAs.
- Better employee retention.

However, if you want to offer an HSA to your employees instead, your benefits include: 
- Tax advantages.
- Flexibility with how much you contribute.
- Less record keeping.
- Your workforce becomes more engaged with their health care and medical expenses.
- Lower expenses.

On the other side of the coin, if you’re an employee, the [benefits of an HRA](https://livelyme.com/guides/hra-guide/) include:
- No need for an HDHP.
- It’s completely funded by your employer. 
- You have access to the funds from the first day of coverage.

However, if you choose an HSA instead, here are the advantages:
- Portability.
- Can invest the funds for retirement in mutual funds.
- You get all the tax benefits.
- 
### Are all high-deductible plans HSA eligible?

Not necessarily. They need to meet the requirements set by the IRS to qualify as a true HDHP, which is HSA-eligible. Also, true HDHPs will cover preventive care without requiring you to hit your deductible but offers no other benefits until you reach that point.

Also, it’s important to note that in order for you to be able to contribute to an HSA, you must also meet other requirements, including;
- You have coverage under the IRS’s definition of an HDHP on the first day of the last month of the year.
- You have no other health coverage, and you’re not enrolled in Medicare.
- Someone else isn’t claiming you as a dependent on their tax return.

### Can I have an HSA if my employer offers an HRA?

Yes, but only under very limited circumstances. Most general HRAs will make you ineligible for an HSA. But if your company offers a “limited purpose” HRA or a “post-deductible” HRA, then you may still be eligible for an HSA. Also, if your employer contributes to an HRA that you can only use when you retire, you may be eligible for an HSA.

A “limited purpose” HRA is one where you can only use it for dental, vision or preventative care. A “post-deductible” HRA is one where you can use it to pay for medical expenses after the IRS deductible is met.

### Can I contribute to an HSA without an HDHP?

No. But you can still spend the funds in your HSA or reimburse your medical expenses until the account is empty. 

### Can I have an HSA if my spouse has an HSA?

If your spouse has an individual health policy and no other form of health insurance, then you can get an HSA for yourself, as long as you meet all the other requirements. 

However, if your spouse uses a [health care FSA](https://livelyme.com/blog/what-is-a-healthcare-fsa/), then you wouldn’t be eligible. This is because your partner can also use their FSA funds to pay for your medical expenses. The devil’s in the details, though. If your spouse’s FSA is a limited purpose FSA (one that covers vision and dental only), then you can get an HSA.

### Can an HSA plan have copays?

Yes. The IRS defines copays as an out-of-pocket expense in an HSA-eligible HDHP. HDHPs have to have a [max out-of-pocket limit](https://www.healthcare.gov/glossary/high-deductible-health-plan/).

### Can HRA be used for premiums?

For most employers, the simple answer is no. HRAs were often used by employers to reimburse workers insurance premiums. But, that changed with the Affordable Care Act (ACA). Under the ACA, an HRA can no longer pay for health premiums. There are some exceptions, though.

For example, ACA market reforms do not apply to retirement HRAs and stand-alone. The first option is offered only to retirees, while the second is an HRA with only one plan member. Under these two specific HRAs, you can use them to reimburse health care premiums.

### Can HRA funds be rolled over to an HSA?

As of 2012, you can’t roll funds over from an HRA into an HSA.

### Can you contribute to an HSA without health insurance?

No. To contribute to an HSA, you must be on a qualified HDHP and not otherwise insured. A family member can contribute on behalf of other family members as long as they are eligible. But to be able to contribute to an HSA, you need to have an HDHP.

## How to work out what plan is best for you

When deciding which health plan to choose, you’ll want to take a thorough look at the following factors:
- Do you expect to visit the doctor often? 
- What is your risk tolerance? 
- Will you be able to afford an expensive medical bill if an unexpected event happens?
- How big of a network do you need?
- Can you max out an HSA every year?

Take a clear look at the math of the plans you’re weighing up. Sometimes even though the deductible for a traditional plan is lower, it doesn’t make financial sense if the employer contribution to the HSA in the HDHP plan is high. 

At the end of the day, no-one can tell you what plan is best for you. Only you know your unique situation and your risk tolerance. Consider speaking with a tax advisor to get personalized advice to help you make the choice that’s best for you.

Choosing the right health care plan for you hsa vs ppo

HSA or PPO? The good news is that you don’t have to pick, as long as you have a high-deductible plan in a PPO network.

HDHP HSA vs PPO Plans: Which is better for health insurance? 

What’s the Difference Between an HDHP with an HSA and a PPO?

What if I qualify for Medicare?

If you qualify for Medicare and have HSA questions our articles can help.

What if I am married or planning on getting married?

Here you will find HSA related articles regarding marriage and tax savings.

What if I am unemployed?

Currently unemployed? Find out how you can save on your taxes with these USA articles.

What if I am self-employed?

If you are self-employed in a high deductible health care plan (HDHP) read our articles on how HSA's can help save money on taxes.

What if I just had a baby or adopted?

Whether you had a baby or adopted one our articles on HSA tax savings can help.

What if I had a baby or just adopted?

What if I am under 30?

If you are under 30 and have a high deductible health care plan find out how an HSA can save you money.

What if I have children?

Are you looking for HSA related articles regarding children? Take a look at what we have.

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