your health insurance savings account options

Flexible Spending Account (FSA)

Flexible Spending Accounts (FSA) are tax-advantaged financial accounts set up through an employer. These accounts permit employees to set aside a pre-determined, limited portion of his or her earnings to pay for qualified expenses tax free. Money is deducted from payroll into an FSA and is free from federal state, and in most cases, FICA tax and does not appear on a W-2 as reported income. Employers may make contributions to the account but are not required to. Funds in the account are considered “use it or lose it,” so up-front decisions as to how much to contribute should be made wisely. The majority of these accounts are set up for medical expenses and/or dependent day care expenses.

Health Reimbursement Account (HRA)

A Health Reimbursement Account (HRA) is a creative option for employers to mitigate rising premiums by reimbursing (self-funding) a portion of the covered person’s deductible or out-of-pocket expenses. Statistics prove that a small percentage of insureds actually incur more than $500 in benefits. Lower premiums are obtained by purchasing higher deductibles for the group and offsetting expenses of only those who use the plan.

Administration for these plans can be more complicated than what it might seem. An outside administrator is used for claim reimbursement and to prepare filings that must be compiled and reported to the Centers for Medicare and Medicaid Services (CMS) quarterly.

Heath Savings Account (HSA)

Health Savings Accounts (HSA) are tax-advantaged savings accounts funded by the employer, the employee, or a combination of both. They are owned by the individual, they are portable, and they can reimburse current and future medical expenses. Qualifying medical expenses include not only deductible and co-insurance out-of-pocket expenses, but also a vast array of additional expenses not generally covered by insurance carriers. Contributions and earnings are tax deductible and withdrawals for qualified expenses are tax-free. These accounts are set up only in conjunction with qualifying high deductible health plans, which require minimum deductibles and maximum out-of-pocket limits. Funds in the account roll over from year to year.

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