FSA, HSA, HRA, RRA...What's It All Mean?

Making Sense and Making the Most of These New Types of Health Plans

If you're "benefits-savvy" and are participating in a consumer-directed health plan, you may need a few pointers. These plans, which usually combine an underlying health plan, like a Preferred Provider Organization (PPO), with a fund or account like an FSA, HSA, HRA, or RRA, are relatively new on the benefits scene. Now, don't be intimidated by this alphabet soup of names. Think of these plans like medical bank accounts, giving you more control over a portion of your health benefit dollars.

How? By providing you with credible information and letting you use that information to make decisions about the doctors you use, the hospital you go to, and with the OK from your doctor, even whether a generic or brand name drug is right for you. You then pay for your health care needs using an account, similar to your bank account, or receive coverage through the medical plan that is connected to your fund. It's important to note that you may spend more out-of-pocket in these plans, and if you have a choice, think through whether these benefits are right for you.

If the idea of balancing yet another checkbook makes you sick just thinking about it, don't worry. They're really not that hard to master. Just take the time now to learn how your account works — and soon you'll be spending your health benefits dollars like a pro.

What's What — FSA, HSA, HRA, RRA — The Basics:

Flexible Spending Account (FSA)
FSA Fast Facts — With an FSA, money is taken from your paycheck before taxes (you set the amount) and put into an account. You can then use that money to pay for medical expenses throughout the year. It's important to understand that FSAs have a "use it or lose it" provision — meaning that you must use the dollars in the year in which they are saved or you will lose them at the end of the year. Check with your plan to make sure expenses are "covered," meaning they are approved by the Internal Revenue Service as a qualified medical expense that can be paid for with your tax-free dollars. For example, while the cold medicine and band-aids you pick up at your local pharmacy can be paid for with your FSA funds, the magazines you buy at that same pharmacy would not be covered.

Click here for a full list of allowable FSA health care expenses.

Health Savings Account (HSA)
HSA Fast Facts — With an HSA, traditionally money may be taken from your paycheck before taxes or you can open up an individual HSA account and contribute money on your own. Your employer or a family member can also contribute to your HSA. To qualify for an HSA you must be a member of a "high-deductible health plan." This means that your plan — in many cases a PPO — requires that you pay a certain amount of money up front before your plan coverage kicks in. The great news is that your HSA funds can be used to pay for this deductible. You can also use this money into the future — letting you save for medical expenses down the road. So, even if you chicken out on your LASIK eye surgery, you don't lose that money.

Health Reimbursement Arrangement (HRA)
HRA Fast Facts — An HRA is an account offered to employees or retirees, where you can use the money to pay for deductible and co-insurance amounts, or covered medical expenses. Like an HSA, leftover dollars generally can be used from year-to-year, as long as you continue to be a member of the plan. Also, the money is contributed by your employer and doesn't count as income; saving you valuable tax dollars — complete with Uncle Sam's stamp of approval.

Retiree Reimbursement Account (RRA)
RRA Fast Facts — This is a type of HRA where the money is available to use for covered medical expenses once you retire. The RRA is funded solely by employer contributions. You can't add money to these accounts. These funds are available to reimburse covered health care expenses in retirement. Only "covered expenses" as defined by the plan can be reimbursed by an RRA. These rules are set by your employer; RRAs often cover insurance premiums for Medicare or Medigap coverage as well as most traditional health-related expenses. RRA balances grow while you are employed, and in retirement the unused balance rolls over from one year to the next.

Consumer-Directed Health Plans At-A-Glance

Quick Tips to Make the Most of Your Benefits

• Get into the habit of saving receipts and tracking expenses along with your regular monthly bill paying. Make sure your family knows to track these expenses, too. Keep them in a separate box labeled "Health Care Expenses." At the end of the year, you can estimate how much you and your family spent per month — to give you a head start on next year's estimate.
• Develop a monthly spending plan for your expected health care costs. This will help you actually spend your FSA dollars — to avoid losing any leftover money at the end of the year. Every time you go to the drugstore and buy allergy medicine, try to save your receipts for your FSA dollars.
• If you have an FSA, spend that money! Don't wait until the end of the year to make preventive health appointments. Schedule teeth cleanings, eye exams and women's health checkups throughout the year. Then you can use FSA dollars for eyeglasses, contact lenses or dental work if needed.
• Check your plan options and details. Most health plans offer websites to help members maximize their health benefits. It's good to know the guidelines of your plan, so you can better plan your spending and take advantage of all your plan offers, like preventive services (such as "well woman" visits).
• Be smart — compare costs and do some research to make the most of your health care dollars.
• Websites from your health plan may list quality information about physicians and hospitals and health care costs for different procedures to help you make good decisions. Some other sites that provide general health care and health plan information include:
• healthfinder^®
• FirstGov.gov for Citizens, Health Section
• America's Health Insurance Plans
• Agency for Healthcare Research and Quality (AHRQ), Choosing and Using a Health Plan
• U.S. Department of Labor, Consumer Health Plan Information
• Aetna InteliHealth^®
• Know your options. With an HSA, for example, you can choose to pay for medical services out-of-pocket with your own money instead of using money in your account. You may want to do this if you are saving money for future health care needs.

Whether you already have a consumer-directed plan or are thinking about signing up for one next year, learning the ropes is the first step to making sure you spend your health care dollars wisely.

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