Saving money is important, so it pays to look for every opportunity available to put money aside from your paycheck. Thankfully, most employers provide access to health savings accounts (HSAs), a type of savings account that can be used to pay for medical expenses.

Although the tax-free benefits of an HSA are fairly well-known at this point, a new type of individual health savings account is growing in prominence, and it may provide a better option for those looking for ways to save on medical expenses.

Individual Coverage Health Reimbursement Arrangements

An individual coverage health reimbursement arrangement (ICHRA) is a type of health plan that reimburses employees for private health insurance costs. Most of these types of plans are sponsored by employers, and the employer has a lot of say concerning what is and is not a reimbursable expense. For this reason, you will want to be sure you completely understand the details of your plan if your employer offers individual coverage health reimbursement arrangement benefits. Click here for more information about ICHRA.

Health Savings Accounts

With an HSA, you and your employer can contribute tax-free money to a special savings account. Funds in this account can only be used to pay for medical care costs; however, coverage extends to everything from over-the-counter medications to surgical procedures. There are limits to how much can be contributed each year, so you cannot continue to contribute beyond a certain point.

Which Benefit is Better?

Determining whether an HSA is better than an individual coverage health reimbursement arrangement comes down to your financial goals, your employer, and your options. If you have the opportunity to purchase affordable health insurance on your own and your employer doesn’t provide insurance but does offer an individual coverage health reimbursement arrangement, this might work out better in the long run.

On the other hand, if you have health insurance but would like to pad out your ability to pay for expenses not covered by your plan, an HSA may be the way to go. Once again, an HSA does have contribution limits, so whether you contribute, your employer contributes or a mix of both, you can max out your ability to save fairly quickly.

Author Resource:-

Daniel Stewart has been helping people with their money management and personal finance with over 15 years’ experience in business finance. You can find his thoughts at health investment blog.