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Dec 192012
 
 December 19, 2012  Posted by  Health & Beauty, Taxes
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A health care flexible spending account (FSA) is an employer-sponsored benefit that allows you to save money for medical expenses for you and your family. The money is deducted from your paycheck before taxes, just as it is with your 401k.

An FSA covers expenses that are not covered by your regular insurance. Covered services include things like office visits, co-pays, dental care, eyeglasses, contact lenses (and solutions), prescription medications, hospital fees, contraception, acupuncture, chiropractic services, diabetic supplies and more. You will initially have to pay these fees out-of-pocket, but once you provide proof of payment for an eligible expense, you’ll receive a reimbursement check.

Here are a few questions you should ask yourself when determining whether or not you should take advantage of your employer’s FSA:

1. What type of ongoing medical expenses do you and your family members have? If you have ongoing expenses that aren’t covered by your health insurance, such as diabetic supplies, disposable contact lenses or contact lens solutions, prescription medications or monthly contraceptives, you may benefit from having an FSA. It’s much easier to have the money for these ongoing out-of-pocket expenses withdrawn from your paycheck than it is to try to come up with the money after you’ve paid your bills. And having these expenses deducted from your income will reduce the amount of income tax you’ll have to pay each year.

2. Do you have high co-pays or deductibles? Even if you don’t have ongoing medical expenses, if you have high co-pays or deductibles that aren’t covered by your insurance, you might still benefit from an FSA. If you have a family deductible of $1,000 or more, and you usually come close to meeting or exceeding that deductible, you might want to consider an FSA. If you have high co-pays for office visits or prescription drugs, and you find yourself struggling to come up with the money each time someone in your family gets sick, an FSA might also be a good option for you.

3. How likely are you to actually use the money you’ve saved? Although it’s tempting to go for the tax break by enrolling in an FSA, keep in mind that FSAs are a use-it-or-lose-it benefit. Any money you don’t use by the end of your plan year will be forfeited to your employer, which may negate your initial tax break.

Once you’ve decided you could benefit from an FSA, your next step is to decide how much to save. Under the Patient Protection and Affordable Care Act, the maximum you can save per plan year is $2,500, but you may not need that much. Add up any anticipated out-of-pocket expenses for the year, such as ongoing medical or prescription drug expenses that aren’t covered by your insurance. If you usually exceed your annual deductible, add that in, as well. But be conservative with your estimate. Remember:  if you don’t use it, you lose it.

You only have one opportunity each year to sign up for an FSA. For many companies, FSA is at the end of the year and for others FSA enrollment is in January, so if you want to sign up, contact your human resources department right away.

If you’re already participating, remember that you only have until December 31 to use this year’s contributions.

Julie Henry

Julie Henry, RN, MPA, is a freelance writer, editor, and project manager who loves the thrill of scoring a good deal. She writes a bi-weekly "On the Cheap" column for the Sun News in Myrtle Beach. In addition to writing about deals and discounts, Julie is an established medical writer. She has done work for a number of national health care organizations, including The Joint Commission, The American Academy of Family Physicians and the Society for Teachers of Family Medicine. Born and raised in Kansas City, MO, she now lives in Myrtle Beach. Julie owns and operates Kansas City on the Cheap, Myrtle Beach on the Cheap, and Charleston on the Cheap.

One comment on “Is a health care flexible spending account for you?

  1. It’s really disappointing that the Affordable Care Act now limits us to $2500 in our FSA. Our family’s medical issues are severe (multiply disabled child & cancer for me) and when the FSAs were first available, we’d have to put up to $17.000 a year in ours – a big tax help. Now it’s dwindled down to that measely amount, which doesn’t even cover our prescriptions for the year.

    They are a great thing still, and our company puts the full amount in our account on January 1st. Then we have a debit card to use and it makes it very convenient. People are crazy to pass up using them.