Health Insurance and Flexible Spending Accounts (FSA)

If you have a high deductible health insurance policy, you know the out of pocket expenses can be quite considerable. Before you reach your deductible you are responsible for covering all the medical expenses yourself, which for some policies can be the first $2000, $3000, even $5000 out of pocket.

In order to offset these costs, many employers now offer Flexible Spending Accounts, or FSA’s. Typically a FSA is a program offered by your employer to put pre-tax dollars away into a savings account that can only be for eligible medical expenses. Some Flexible Spending Account programs allow you to put away money for dependent care such as day care for children during the workweek.

What You Need to Know About Flexible Spending Accounts
Flexible Spending Account funds can be used by the employee for many different uses such as: deductibles, doctor-visit co-pays, over-the-counter meds, dental, and vision expenses. This works out ideally for people that carry high-deductibles on their health insurance and would have to pay these items with their after-tax income instead.

The advancements in Flexible Spending Accounts has come a long way from the original days where you had to submit claims through complex forms and saving all your receipts. Now many Flexible Spending Accounts allow you to use a debt card to charge these out-of-pocket expenses and the claims are processed automatically for you.

The Downside of Flexible Spending Accounts
Any funds you place into your Flexible Spending Account that are not used during the specified one year period are not rolled over or refunded. These funds are sent to your employer instead. This is why it is very important to calculate exactly how much you want to have your employer take from each paycheck and placed into your FSA. So, estimate how much you annually spend out-of-pocket for healthcare and place only that amount in your Flexible Spending Account each year.

Your employer must place the entire amount of the Flexible Spending Account funding you have requested for the year up front. This means your employer assumes the risk of any one of the employees exhausting all the funds in their Flexible Spending Account early in the year and then quitting when the account is dry, leaving the employer to cover the funds regardless of that employing no longer working there.

Flexible Spending Accounts are Here to Stay
Regardless of the downsides or any risks to employers, Flexible Spending Accounts are a great new invention by business owners to help you cover your medical expenses with pre-tax money. Make sure you ask your employer if you have access to a FSA at your place of work. If so, you should talk to a health insurance agent to discuss the details.

Visit InsuranceAgents.com for more information.