As a health provider I have seen a huge swing in health care reimbursement in the last few years. The days of $5 co-pays seem to be long gone! A patient came into the office last week with a $45 co-pay, which was laughable due to the fact that his health insurance company only paid $42 per visit. Their co-pay was more than what the company was paying me under contract!!!
In order to offset the sting of high deductibles and co-pays, companies are allowing employees to put pre-tax salary away to pay for these health costs. As of 2010, the limit is $5000. This is typically called an FSA (Flex Spending Account)or an HSA (Health Saving Account)…is there a difference? Yes, a big one!
First please let me explain some basics. You decide that over the course of a year it is reasonable that you are going to spend $3,000 on health care. You tell your employer, during open enrollment, and they begin deducting money out of your check…PRE-TAX! That could be a huge savings if you are climbing into the high tax bracket.
Let’s say you have a $2000 deductible on your plan and your company has graciously agreed to pay this for you. You would receive an HSA card that you would use to pay down your deductible. This card is a SAVINGS account and that is an important distinction, you get to keep this money from year to year.
Now instead of a $2,000 deductible, your employer has decided to raise the co-pays in order to keep the monthly payments down. You go to your local chiropractor, think me, and are shocked when I tell you that your co-pay for today is $30. In order to offset this sting, you have told your employer to put $1000 away for you for these exact expenses. This would be called an FSA. Here is the kicker, at the end of the year, whatever you don’t spend…you lose, the money goes back to your company!!
Most companies today are making it easier and easier to use these funds. In the old days, you would have to send in receipts and wait for a check. Now these companies are issuing debit cards that allow you to charge your account directly saving you a lot of hassle.
If you are unsure of the benefits or want to learn more about HSA and FSA accounts please visit here and the IRS will be happy to get into more details.
Please do not forget, if you have money in an FSA at the end of the year, get out there and spend it or it will be gone forever!