Types of Personal Health Accounts

What is an MSA?

An MSA is a trust or custodial account established to pay medical expenses in conjunction with a high-deductible health plan. To be eligible for an MSA, an individual must be either employed by a small employer that establishes a high deductible health plan, or a self-employed person covered by a high deductible health plan.

For more information:
MSAs for Everyone, Part I
MSAs for Everyone, Part II
MSAs for Everyone, Part III

What is an FSA?

Special accounts authorized under Section 125 of the Internal Revenue Code and typically funded by an employee’s salary reduction to help pay certain expenses not covered by the employer’s plan or insurance contract. Because FSA deposits escape federal income taxes, participants can pay for medical care with pretax dollars, but they forfeit any unused funds at the end of each calendar year.

For more information:
Flexible Spending Accounts: The Case for Reform

What is an HSA?

An HSA is a tax-free account with money deposited by individuals, employers, or both to spend on routine medical costs. The account is combined with an inexpensive, high-deductible insurance policy to pay for catastrophic medical care in case of major accident or serious illness. HSAs create a financial incentive to spend dollars wisely, because unspent dollars accumulate tax-free in their own personal accounts. Consumers are able to shop around, compare prices and providers, and select the medical services that are best for them.

For more information:
Health Savings Accounts: Answering the Critics, Part I
Health Savings Accounts: Answering the Critics, Part II
Health Savings Accounts: Answering the Critics, Part III

What is an HRA?

A Health Reimbursement Arrangement (HRA) is an instrument offered in conjunction with a high-deductible health plan, and is funded by the employer for each participating employee. It pays for eligible health care expenses typically covered under the medical plan. Unused funds can be carried over to the next year to cover future health care expenses, an incentive to employees to use their personal HRA wisely. If funds are exhausted, the employee is responsible for satisfying the remaining deductible before the plan begins to pay. If the employee changes jobs, the money stays with the employer.

For more information:
Health Reimbursement Arrangements: Making a Good Deal Better