Flexible Spending Account (FSA) and Health Savings Account (HSA) plans are like all personal savings accounts. However, the funds in these accounts can only be used strictly for qualified medical expenses, which cover everything from insurance deductibles and copays to supplies like bandages, crutches, and contact lenses.
Is an FSA or HSA better than a regular savings account?
It’s all about taxes. Your earnings are transferred to these accounts without being taxed as income and are also protected from unemployment, Social Security and Medicare taxes. This helps you in two ways. You keep more money for the account, and because it doesn’t count as taxable income, you potentially keep your income at a lower tax bracket.
FSA: a Use it or Lose it Fund for Medical Expenses
What you need to know about this account is that you can win quickly, but also quickly lose access to your funds.
With an FSA, you can invest tax-free income in a deposit that covers living expenses.
There are two types of FSAs, a Dependent Care Flexible Spending Account, which can be spent on work-related child care, and a Health Flexible Spending Account, which is used for qualified medical expenses. Both accounts are owned by your employer.
The main thing with the FSA is how soon your funds will be available. You must enroll in the program and set your contribution amount during the fall enrollment period, but then you have access to the entire budget beginning January 1.
The downside to an FSA is its limited protections for job transitions and annual transfer. If you leave or lose your job in the middle of the year and have not fully used your FSA balance, you will likely lose access to it. Check with your company because the guidelines vary from company to company.
HSA: More Ownership of your Medical Account
The HSA covers all qualified medical expenses, but the protections and limitations of this account are very different.
The first thing to know is that not everyone is eligible for an HSA. It is only available to people who use a high deductible health insurance plan, one with an annual deductible of $ 1,350 or more.
The account is entirely yours, not your employer’s. This means there are no concerns about job transitions or the annual transfer limiting your access to balance. It’s yours to use when you need it. You are also allowed to withdraw funds to pay for non-medical expenses, but you will have to pay income taxes for your withdrawal.
HSA accounts have a higher contribution limit. Individuals filing independently can invest $3,550, while married couples filing mutual can double that number. HSA totals can be changed at any time.
The downside to the HSA is that you cannot spend more than your investment. Instead of accessing the full contribution amount as of January 1, you can get only what you have saved in your account.
How the FSA and HSA work with Concierge Medicine
These expense accounts cover an extensive list of medical expenses.
The HSA and FSA work just as well with concierge care as they do with traditional medical practices. So you can have the dedicated attention of a concierge office while enjoying the tax benefits of your spending account.
Any copay, prescription, or concierge expense that you may bill your insurance company must be eligible for the FSA and HSA. Depending on your individual plan, these costs may apply to your FSA or HSA. Review your plan to make sure you have a clear understanding of the types of expenses that may apply to your FSA or HSA.
Do you want to know more about costs and concierge services? We are here to help. We encourage you to contact us to learn more about the potential savings and all that concierge medicine has to offer.