Fall is open-enrollments season for most employees, the time of year when you can change or newly enroll in your company's benefits, including health insurance.
You may not know about alternatives that can be used to pay for your medical expenses, such as Health Savings Accounts and Flexible Spending Accounts. These tools were designed to help Americans save money to cover the cost of health care expenses that are not covered by your insurance plan. Here are a few important facts about Health Savings Accounts and Flexible Spending Accounts to help you choose the one that works best for you:
Health Savings Accounts – An individual or employer-provided pre-tax savings account for health care expenses:
• Can only be used if you have a high deductible health plan (HDHP).
• Unused funds deposited into an HSA can roll over to the next year (and may earn interest).
• HSAs are limited to $3,450 in deposits per year for an individual, $6,900 for a family. If you are 55 or older the catch up contribution to build a cushion is $1,000 additional.
• The funds can be used to pay for your out-of-pocket maximums, hospitalization and/or outpatient surgery costs, etc.
• The funds can also be used to cover your health care expenses before you reach your deductible and other out-of-pocket costs such as co-payments and co-insurance.
• You may have a higher tax return whenever you contribute funds to a health savings account.
Flexible Spending Accounts - A pre-tax savings account for health care expenses that can only be opened through your employer.
• Can be used to pay your out-of-pocket health care costs and health care costs for your spouse, children, and dependents.
• Can also be used to pay for dental procedures.
• FSAs are limited to $2,650 in deposits per year.
• Your spouse can also deposit up to $2,650 per year into an FSA.
• You must use the funds deposited in an FSA within the year.
• $500 will roll over to the next year (if not used within the year), if your employer allows it.
• Other employers may give you an additional 2 ½ months grace period to use your FSA money.
Why Use HSAs or FSAs?
Never underestimate health care costs, even if you are healthy. Health issues can arise at any time. When that time comes, having a health savings account or flexible spending account will improve your ability to manage your health care expenses without becoming overwhelmed.
Example Medical Costs
The average medical costs associated with treating a broken leg could be as high as $7,500.
A short hospital stay could result in $30,000 in medicals bills.
Whatever isn’t covered by your insurance will need to be paid by you. HSAs and FSAs will help you cover some or all of those costs. You can protect your money and avoid going into deep debt as a result of unexpected health care expenses, or those costs not covered by your insurance.