The FSA & HSA: Tools to Save Money on Health Care Expenses

Unlike in Canada where the health care is free and maple syrup pours like water, health care in this country can be a huge financial burden for a lot of people. Especially when you have a high-deductible plan, you run the risk of going broke if god forbid you need medical care. Even when you are insured through your employer, it seems like health care expenses can get high after co-pays and deductibles. Flex Spending Accounts and Health Savings Accounts are two amazing tools to save money on health care expenses:

If you’re insured by employer: Flex-Speding Accounts

If you receive insurance through your employer, a flex-spending account (FSA) is an employer-provided benefit and a great tool to help you pay for your out-of-pocket medical expenses. It allows you to take money out of your paycheck on a pre-tax basis that you can then use for qualified medical expenses throughout the year. With this you get the tax break of money exempt from federal, state and payroll taxes, but the catch is that if you don’t use the money, you lose it back to your employer at the end of the year.

Fortunately, qualified medical expenses can include things like acupuncture (great), dental fees (fantastic), and psychiatric care (you never know). So you can work on that mood disorder without losing the money (since that would just make you even more of a cranky bitch). Check here for a list of qualified expenses. New Yorkers visit http://www.flexspend.ny.gov/ for more info.

If you have a high deductible plan: Health Savings Accounts

A health savings account (HSA) is a tax-advantaged medical savings account available to those who are enrolled in a high-deductible health plan (In 2010 this meant any plan with a deductible of at least $1200 for individuals). You pay no federal income tax on this money, and it can be rolled over each year. These funds can then be used for qualified medical expenses (which, according to the government website do NOT include dance lessons – What?? Zumba is therapeutic goddammit). Find eligible high deductible plans on www.ehealthinsurance.com.

I was paying a ton for my health care coverage, and when I found out I had a small area basil cell carcinoma on my face, my overpriced insurance company told me sorry, removal is considered surgery and you must meet your deductible first. My deductible was $3k. Unbelievable. If I had had one of these accounts in place with a high deductible plan, I would have been able to use pre-taxed dollars to pay for this expense.

No matter what, unless you are paying ridiculous premiums each month for your health care, you’re in trouble if you ever really need medical care. Might as well have a little cushion to break the fall (literally or figuratively) so that it doesn’t hurt quite so bad.