Defined Contribution Health Plan Engagement: HSAs vs HRAs


A defined contribution healthcare benefits strategy has shown to be an effective approach to curbing rising employee healthcare costs. But what is the best account-based approach to take for engaging employees in managing their own healthcare?


Not only are employers better able to anticipate and control their benefits spend, but employees are managing their own costs thanks to the design of account-based consumer-driven healthcare (CDHC) plans popularly offered in a defined contribution program. These health reimbursement account (HRA)- and health savings account (HSA)-based plans each play a role in an employers’ benefits strategy, but when it comes to shaping an engaged consumer—using cost and quality information to make healthcare decisions—research suggests HSAs have the edge.

HSAs Promote Cost-Conscious Behaviors

Findings from the 2013 Employee Benefits Research Institute/Greenwald & Associates Consumer Engagement in Health Care Survey show adults with HSAs were more likely than those with HRAs to show cost-conscious behaviors across the spectrum of healthcare decisions ranging from choosing a health plan to participating in a wellness program. These behaviors include: 

– Participated in wellness program (health-risk assessment) (81% HSA vs. 66% HRA)
– Checked whether plan would cover care (57% vs. 56%)
– Visited health plans’ websites to learn about their plans (53% vs. 45%)
– Asked for generic drug instead of brand name drug (52% vs. 49%)
– Attended a meeting where health plan choices were explained (49% v. 39%)
– Checked price of service before getting care (41% vs. 34%)
– Developed budget to manage healthcare expenses (32% vs. 22%)
– Consulted with an insurance broker to understand health plan choices (31% vs. 11%)

To help explain the differences, consider how HSAs and HRAs provide different consumer experiences based on the way they’ve been designed. HRAs provide employers with a great deal of flexibility and HSAs give employees more control. HSAs simply have more points of engagement resulting in a superior level of personal involvement as well as financial incentives that make them more cost-conscious. 

Point of Engagement



Manage funds in account



Pay out-of-pocket expenses before deductible



Account owned by employee



Account is portable



Employee can contribute funds to account



Employee can invest savings




Key #1: Personal Involvement

With both HSAs and HRAs, people are personally involved in managing the funds in their accounts. They pay eligible out of pocket medical expenses before their health plan deductible is met and keep track of what they’ve spent. While HRAs are owned by the employer, HSAs are owned by the employee. HSAs are also completely portable, so the employee—as account owner—can take the HSA with them from company to company and use the account as a long-term investment. 

Key #2: Financial Incentives

Another important distinction between HRAs and HSAs is that HRAs are funded solely by the employer while HSAs can be funded by the employer, employee, or both. Because employees own their HSA and can make contributions to it, they have some financial “skin in the game.” This further encourages involvement in their healthcare spending and savings. In fact, many people use their HSA as a retirement savings vehicle to take advantage of triple-tax benefits, making healthcare savings an important part of their financial portfolio and financial wellness. 

Education and Support

If personal involvement and financial incentives are the keys to employee engagement with their account-based healthcare plan, then an employer’s education and support program is the key chain. Employees need to understand their coverage and HSA in order to engage effectively as healthcare consumers. Employers can provide employees with training and decision support tools, among other resources, to guide them along the path of engagement and ensure success of their defined contribution healthcare benefits strategy.

Read more about creating HSA awareness among employees.   

Learn more about the differences between HSA and HRAs:
Private Exchanges and HSAs: A Powerful Combination
A Closer Look at Employer HSA Strategies and Trends (Video)
Consumer-Driven Decision: Weighing HSAs vs. HRAs from Society For Human Resource Management’s (SHRM) 

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