Health spending accounts are used to pay for medical expenses that your healthcare plan doesn’t cover, such as deductibles or copays. They’re part of what’s called consumer-directed healthcare.
There are several
types of health spending accounts, including:
- A
health savings account (HSA) is a tax-favorable savings
account for medical expenses and is typically used in conjunction with a
high-deductible health insurance plan. Unlike a flexible spending
account (FSA), unused money in your HSA isn’t forfeited at the end of the
year; it can be rolled over and used for the following year’s qualified
health expenses.You can only have an HSA if you enroll in an
HSA-compatible health plan.
- A
flexible spending account (FSA) is set up by your employer. They own
the account, but you get to decide which qualified medical expenses to pay
for with your FSA. What makes it flexible? It works with most of PPO
employer-sponsored health plans. Unused money in the FSA at the end of the
year may have to be forfeited. In addition to medical expenses, FSAs can
often be used to pay for childcare expenses, as well as other expenses.
- A health reimbursement arrangement (HRA) is a benefit fund set up by your employer. Your employer contributes a certain amount of money each year for you to use for medical expenses not covered by your health plan. Only your employer can fund an HRA. In most cases, if all of the money is not used by the end of the year, the HRA can be rolled over to the following year – as long as the employee stays on the same plan
Examples of Qualified Medical Expenses
If you have one of
these health savings accounts, it’s important to be aware of what is considered
a qualified medical expense to be able to use these funds. A qualified medical
expense is one that can be purchased with tax-free money through your health
savings account. Some examples of qualified expenses include:
- insulin
and diabetic supplies
- eye
surgery (including laser eye surgery)
- doctor’s
fees
- fertility
enhancement (including in-vitro fertilization)
- first
aid supplies and bandages
- dental
treatment (x-rays, fillings, extractions, dentures, braces, etc.)
- braces
and supports
- wheelchairs
and walkers
- contact
lenses and reading glasses
- prescribed
medications
- sleep
aids
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