As October approaches, many of our patients are about to renew their health care plans with their employers. While dealing with insurance benefits can be daunting, evaluating your needs as a family or individual can make the process a lot easier. If you plan to stick to the standard medical path, with routine check-ups by your MD or have expensive prescription medications, one of these consumer directed health plans may not be right for you. But if you plan to use services with benefits that have limited or no coverage by your plan, such as acupuncture, massage, chiropractic; or you anticipate future health care bills, such as a planned surgery, pregnancy or for just a “rainy day”, one of these tax free “medical bank accounts” might be the perfect fit. Please note, not everyone has the option to opt-in or out of these plans.
FSA/HSA/HRA — The consumer directed health plans defined
These plans are like medical bank accounts, giving you more control over a portion of your health benefit dollars.By enrolling in one of these accounts, you can use it just like your bank account or to receive coverage through the medical plan that is connected to your fund. It’s important to note that you may spend more out of pocket in these plans, and if you have a choice, think through whether these benefits are right for you.
Flexible Spending Account: With an FSA, money is taken from your paycheck before taxes (you set the amount) and put into an account. You can then use that money to pay for medical expenses throughout the year. The money in an FSA does not roll over to the next year. So this is the “use it or lose it” plan.
Health Savings Account: With an HSA, traditionally money may be taken from your paycheck before taxes or you can open up an individual HSA account and contribute money on your own. Your employer or a family member can also contribute to your HSA. This account also earns tax free interest, qualified withdrawals are not taxed and the unused balance carries over to the next year.
Health Reimbursement Arrangement Account: An HRA is an account offered to employees or retirees, where you can use the money to pay for deductible and co-insurance amounts, or covered medical expenses. Only your employer can contribute to this account. Like an HSA, leftover dollars generally can be used from year-to-year, as long as you continue to be a member of the plan. With this type of account, reimbursements are excludable from the employees gross income.
HELPFUL TIPS regarding medical expenses & tax deductions:
- One can only claim medical expenses if it is greater than or equal to 7.5% of adjusted gross income (if covered by an employer’s plan).
- If one is self employed, one can claim 100% of medical expenses on one’s taxes.