With rising health care costs, it is little surprise that many people are looking for ways to help pay for expenses — especially if they have a high deductible health insurance plan, or if their health benefits don’t include vision and dental. Two ways that you can save up for health care expenses include the flexible spending account (FSA) and the health savings account (HSA).
Both of these accounts have tax advantages (money goes in pre-tax, lowering your taxable income), and money that you save up in both of these accounts can be used for a number of medical and health expenses ranging from teeth cleanings to cold medicine to eye exams. However, there are some different eligibility requirements and spending requirements between these accounts. Here are some of the basics:
Flexible spending account (FSA)
The FSA does not have an particular requirements in terms of income or the type of health insurance plan you have. An FSA is offered by your employer, and you can put money in to help make co-pays on office visits, or to buy medicines, or pay for vision and dental procedures that are not covered by the company’s health insurance plan.
The main downside to the FSA is that it is a use it or lose it situation. If you do not empty out the money by the end of the year, it goes back to the employer. So it is a good idea to check your balance, and perhaps go on a spending spree. You can stock up on cold and flu remedies, get some new glasses or find some other way to use the money.
Health savings account (HSA)
Unlike the FSA, money in the HSA rolls over from year to year. It builds up, and so you don’t have to worry about spending it all at once. However, in order to be eligible for a health savings account, you need to have a high deductible insurance plan. You cannot open an HSA if you have a low deductible, paying very little out of pocket. Also, if you have one high deductible plan, but are covered by another plan that is not considered high deductible, you cannot use the HSA.
Consult with a financial professional, and look over your situation to determine whether or not one of these plans will work for you. It might be a practical way to save up money for unexpected expenses in a way that will prevent you from breaking the bank.