Cost awareness
In the old days, after we went to the doctor or hospital, our health insurer paid the bill. Because we didn’t feel much financial pain, there was no incentive for us to shop around for the best deal.
That has changed.
Health care prices are more transparent. You can find out what an X-ray will cost at hospitals and imaging centers near you. And because employees now share more costs with employers, we’re all more conscious about how much we’re paying.
Health funds are one way for employees to manage their costs – and for employers to save money.
Health Savings Account (HSA)*
An Aetna HealthFund® Health Savings Account* works like a bank account. Employees can use the money to pay for qualified medical expenses.
Advantages for you:
- You lower your federal taxes.
- You save on state taxes.**
- You reduce FICA and federal unemployment tax liability.
Advantages for employees:
- Account deposits are tax deductible.
- Withdrawals are tax free -- as long as they use the funds for qualified medical expenses.
- They can roll over any amount to the next year.
- If they change jobs, they can carry the balance to a new employer.
Read more about health savings accounts
*HSAs are currently not available to HMO members in California and Illinois.
**Alabama, California, New Jersey and Wisconsin don't recognize pre-tax contributions to the HSA at the state level.
Aetna HealthFund® Health Reimbursement Arrangement (HRA)*
This is a fund you establish for employees. They can use money to cover qualified health care costs.
Advantages for you:
- You can deduct your employees’ medical expenses as a business expense.
- You can choose to permit or limit the rollover of unused funds.
- Because you determine the contribution amount, you can better manage your health care budget for the year.
Advantages for employees:
- Their reimbursements are tax free for qualified medical expenses.
- If you choose, they can roll over any money they don’t use. This helps them save for unexpected medical expenses.
Explore health reimbursement arrangements
*HRAs are currently not available to HMO members in Illinois and Small Group members in Florida.
Retirement Reimbursement Arrangement
An Aetna HealthFund® Retirement Reimbursement Arrangement is a fund you set up for employees to help them manage their health expenses in retirement. For retirees, this fund helps them better budget their finances.
Flexible Spending Account
A flexible spending account (FSA) allows employees to contribute a portion of their salary before taxes. Depending on the type of FSA, they can use the funds for eligible health care expenses, dependent care expenses, or even some work-related parking and transit costs.
Advantages for you:
- You lower your taxes, including FICA tax liability.
Advantages for employees:
- Employees pay for eligible expenses with pre-tax dollars.
- It’s easy and convenient, with several automatic reimbursement options.
Health Expense Accounts at a Glance
Here is a side-by-side comparison of the various health expense accounts available.
| Account Criteria | HRA | HSA | FSA | RRA |
|---|---|---|---|---|
| Who is eligible? | All employees, as designated by the employer | Anyone covered by a qualified high-deductible plan | All employees, as defined by the IRS | All employees, as designated by the employer |
| Who can contribute? | Employer only | Employer, employee or both | Employer, employee or both | Employer only |
| Does the balance carry over? | Yes – plan can define carry-over limit; HRA balance can carry over to RRA. | Yes | Yes, up to $500, or a grace period may apply (but not both). | Yes |
| Can rollover contributions from another account be made to this account? | No | Yes, rollover contributions from another HSA are permitted; one-time rollover from IRA also permitted. | No | Can roll over funds from an HRA |
| Is the fund or account portable? | No | Yes | No | No |
| Are there interest or investment earnings? | No | Yes | No | No |
| What are the tax advantages? | Employers may deduct reimbursed employee medical expenses as a business expense; reimbursements may be excluded from the employee's gross income. | Employers with a cafeteria plan enjoy FICA tax savings. | Employers with a cafeteria plan enjoy FICA tax savings. | Employers may deduct reimbursed employee medical expenses as a business expense; reimbursements may be excluded from the employee's gross income. |
| Are contributions taxable income to the employee? | No In addition, contributions are not subject to FICA or FUTA taxes. |
HDHP; otherwise taxable In addition, contributions are not subject to FICA or FUTA taxes. |
No In addition, contributions are not subject to FICA or FUTA taxes. |
No In addition, contributions are not subject to FICA or FUTA taxes. |
| Are distributions⁄ reimbursements taxable income to the employee? | No | No, if made for qualified medical expenses; otherwise subject to income tax and 20% penalty. | No | No |
| Is the Aetna Performance Network (Aexcel)* available? | Yes | Yes | N/A | N/A |
Next Step
For more information, call 1-800-553-8422 or talk to your broker today.
HSAs are currently not available to HMO members in California and Illinois.
HRAs are currently not available to HMO members in Illinois and Small Group members in Florida.
*The Aexcel network is only available in select locations. Aexcel is not available with HMO plans. Aexcel designation is only a guide to choosing a physician. Members should consult with their existing physicians and the specialists they’re selecting before making a decision. Designations have the risk of error and should not be the sole basis for selecting a doctor.
Health benefits and health insurance plans are offered, underwritten and/or administered by Aetna Health Inc., Aetna Health of California Inc., Aetna Health Insurance Company of New York, Aetna Health Insurance Company and/or Aetna Life Insurance Company (Aetna). In Florida by Aetna Health Inc. and/or Aetna Life Insurance Company. In Maryland by Aetna Health Inc., 151 Farmington Avenue, Hartford, CT 06156. Each insurer has sole financial responsibility for its own products.
This material is for information only and is not an offer or invitation to contract. An application must be completed to obtain coverage. Investment services are independently offered by the HSA Administrator. Aetna HealthFund HRAs are subject to employer-defined use and forfeiture rules and are unfunded liabilities of your employer. Fund balances are not vested benefits. RRAs are subject to employer-defined use and forfeiture rules. Information is believed to be accurate as of the production date; however, it is subject to change.
Policy forms issued in OK include: HMO OK COC-5 09/07, HMO/OK GA-3 11/01, HMO OK POS RIDER 08/07, GR-23 and/or GR-29/GR-29N.
