What Plan Type is Right for You?
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It seems that many insurance and healthcare professionals throw around acronyms and complex terms that not all consumers quite understand. Well that’s what we’re here for – to ensure you understand, down to each letter, what your plan is made up of.
What is an HSA?
A Health Savings Account (HSA) is an employee-owned health care account into which the employee and employer can contribute funds tax-free. These funds can be used by employees only to pay for eligible healthcare expenses, and the balance can carry over from year to year. To deposit funds in an HSA, one must also have a high deductible health plan (HDHP). Basically, it’s like a bank account that you and your company can deposit money into, but withdrawals are specifically for healthcare costs.
What is an FSA?
A Flexible Spending Account (FSA) is an employer-owned health care account into which employees and employers can contribute funds tax-free. These funds can be used by employees only to pay for eligible healthcare expenses and in most situations are forfeited if not used by a predetermined date. This is like the HSA, but it is owned by the company rather than the employee. It is also not carried over year-to-year in most cases.
What is an HRA?
A Health Reimbursement Arrangement (HRA) is an employer-owned health care agreement in which employers promise to reimburse employees for an established portion of their deductible if it is hit that year. For example with a $1,000 deductible plan where the HRA is 50%, an employer may pay for dollars 501-1,000 of a deductible where they employee has already paid the first $500.
What is a POP Plan?
A Premium Only Plan (POP) Plan, Cafeteria Plan or Section 125 Plan are all the same thing. This plan type is an employer benefit arrangement allowing employees to pay for healthcare plan premiums on a pre-tax basis. For employees that are required to pay part or all of their premium, this plan presents savings where less money is taken out of each paycheck for taxes before the employee receives their pay.
What is an HDHP?
A High Deductible Health Plan (HDHP) is an insurance plan with a higher deductible, higher out-of-pocket maximum, and lower premium than traditional health insurance plans. A consumer is required to have a certain type of HDHP in order to have an HSA. These are structured so the consumer typically pays a smaller monthly payment in the case they are not expecting to have many healthcare costs throughout the year. For someone with health issues or who plans to visit a physician or hospital frequently, this may not be the most fiscally advantageous plan.