How HRAs, FSAs and HSAs are Administered in Self-Funded Plans

We all love choices. Vanilla or chocolate, go out or stay in, HGTV or ESPN?

At a time when many people feel powerless over their own health care, giving your employees choices about how they manage their own medical costs is a good thing — both for them and for you.

Maybe your employees have Health Savings Accounts (HSAs), which you contribute to but they control. Employees can decide which medical expenses to pay out of the HSA and roll over their money from year to year, requiring minimal oversight from you. Perhaps your organization set up a Health Reimbursement Arrangement (HRA), which you fund and employees can use to pay medical expenses that their insurance policies don’t cover. Or maybe your employees use Flexible Spending Accounts (FSAs). Both you and your employees contribute to their FSAs, and they can use those funds to pay for both their own healthcare and care for their dependents, like children and elderly parents. (All three account types offer tax savings for employees.)

Maybe your employees even have access to more than one of these accounts, depending on how you’ve structured your coverage. But while all that choice is great for employees who want to manage their own costs, it can get complicated for employers with self-funded plans to track how accounts are managed and claims are paid. That’s especially true with HRAs and FSAs.

That’s where a third-party administrator (TPA) comes in. Your TPA will handle all the back-end accounting tasks involved in offering and administering these flexible plans. As employees use their accounts, your TPA will track claims, answer their questions and help you make adjustments so these accounts continue to meet everyone’s needs. And while employees own their own HSAs and don’t need much day-to-day management from their employers, your TPA can facilitate the setup of these accounts.

Once your employees have set up their FSAs, HRAs or HSAs and understand how to use them, they’ll be given debit cards that they can swipe to pay for covered services. When issues or questions arise, the TPA can answer them. This system takes the guesswork out of health care administration for employers and allows employees to manage their own untaxed funds.

Could your organization benefit from offering medical spending accounts? To learn more about the options available to you, contact us today.