Health care spending accounts (FSAs) enable employees to set aside tax-free savings for out-of-pocket medical expenses not covered by their health plan, often used alongside high deductible health plans. Although FSAs and health savings accounts (HSAs) might seem similar, each has unique features and purposes.
Employees select an amount to contribute during open enrollment and the funds are deducted directly from each paycheck throughout the year. They can then use these FSA funds to cover eligible expenses such as medical copayments/deductibles/coinsurance/prescription drugs/insulin/over-the-counter medicines/dental vision care etc. Additionally, employees can use FSA funds for spouse and dependent qualifying medical expenses and certain health care equipment like crutches/bandages etc.
Recently, the list of eligible medical expenses has expanded significantly, to encompass an array of over-the-counter and alternative therapies. Individuals must understand which items qualify and which do not in order to plan effectively and make the most of their FSA dollars.
FSAs can be used in conjunction with most types of medical coverage, including both self-funded and fully insured plans, Medicare Part D prescription drug coverage and HSA plans (with certain restrictions). They’re generally accessible to everyone; however, limited purpose FSAs are typically only suitable for HSA-qualified plans.
An FSA can save workers an average of 30 percent1 on healthcare costs and is the preferred means for cutting healthcare expenditure, according to an industry survey.
In order to maximize their Flexible Spending Account (FSA), employees should carefully consider their anticipated medical and dental expenses for the year and use all funds allocated before the close of plan year or within 2.5 months after plan year close (or both) are forfeited.
Maxine, Phil and Sally represent how different life events and financial goals influence a person’s decision about which health care account to select. In this video they explore whether an FSA might work for their situation as well as getting some tips for wise spending and saving whether using traditional FSAs or Health Savings Accounts (HSA).