FSA’s Fill the Gaps Left by Health Insurance

People are opening flexible opening accounts because at times the best of health plans need out-of-pocket expenses like co-payments and deductibles for doctor’s visits, prescriptions with trips to the emergency room etc. According to Lambert Hsu – a CaliforniaChoice benefits broker of Mission Valley’s Benefit Pro Insurance, every family should think about FSA’s while looking at their employee benefits. An FSA is a special account where employees can save nontaxable money into an account for those health expenses which are not covered by medical insurance plans. This saved money, according to Michelle Vroom a senior public relations specialist for Cigna, can be used for medical, pharmacy, dental or day care expenses.

A big plus point of a flexible spending account is that many of the uninsured expenses like hearing aids, eyeglasses, contact lenses etc can be covered. She said flexible spending accounts originated in the 1970s in response to the rising cost of employer-sponsored health benefits. The maximum one can place into an FSA this year is $2,500, according to the Internal Revenue Service.

When determining how much to contribute to an FSA, Vroom said, people should consider their health expenses for the coming year. This could be done by reviewing medical expenses from the previous year; most health plans provided a summary on paper or online called an “Explanation of Benefits” outlining what your plan had paid for health care claims.

She felt one should consider future expenses like children needing braces, contacts or glasses. She also mentioned that those with FSA’s needed to take care as most FSA’s came with a “use it or lose it” rule. Lisa Greene-Lewis, an accountant at TurboTax headquarters in San Diego, said traditionally, most people with FSAs have had to use the money in the account within 2 1/2 months after the year end. However, the IRS recently made a modification that gave employers the option of letting account holders roll up to $500 of unused FSA funds to the next year.

It was each employer’s option to determine whether money from an FSA could roll over, employees needed to check with their company or health insurance provider for details. Among the different types of FSA’s the main one was used to pay medical expenses yearly. The others were used to pay for dependent care, child care and elderly care for those who lived with you.

Greene-Lewis said those interested in getting an FSA should enroll during their employer’s open enrollment period. FSA’s are offered only with job based health plans and not through the new health care market place. When it comes to using funds in a flexible spending account, Greene-Lewis said, reimbursement options depended on the insurance provider, but most account-holders accessed their funds via a debit card, an automatic debit to their account, or they could be reimbursed by the insurance carrier after turning in a claim form.

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Vroom said people should take time to review all the options and determine whatever was right for their family “We encourage people to use their employer as a resource when enrolling in a health plan or FSA and make sure they know which tools are available to help them save on health costs,” she said.

In addition, she said, the Cigna survey showed 75 percent of consumers fear health costs will ruin their chances at a secure retirement. She said given concerns about health care expenses; an FSA is another option to help consumers manage costs.

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“Many consumers that have chronic conditions and need supplies or doctor’s visits on a monthly basis may find an FSA is an easy tool to help budget for their medical expenses throughout the year,” she said. “If used correctly, an FSA can help reduce your out-of-pocket medical expenses and even pay for your monthly health insurance premiums.”

References:

Erinn Hutkin, October 2014

Hannah Punitha (IRDA Licence Number: 2710062)

Source-Newswise