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Alphabet Soup: Understanding Health Savings Accounts

October 8, 2018 0 Comment


Insurance is confusing enough for most people, but the acronyms and abbreviations used can make it much worse. There are three very important acronyms that usually get passed over because many people do not know much about them — FSA, HSA, and HRA. These accounts are extremely valuable tools that can be used to save consumers money when it comes to medical, dental, and vision expenses.

We want to make sure that every consumer is aware of these three accounts and how they can help you save when it comes to your insurance expenses.

FSA — Flexible Spending Account

In this account, you put money into it at the beginning of the plan year and use to help pay for covered health care services and eligible medical expenses. There is no need to sign up for a health plan with this account; it is offered by your employer. Listed below are some important things to know about your FSA:

  • Owned by your employer
  • Reduces taxable income by taking the money out of your paycheck, before taxes
  • You decide how much to contribute
  • Up to $500 will roll over to the following year
  • Anything over $500 will be lost at the end of the year, and if you leave the company, the employer keeps the money
  • Expenses Covered:
    • Qualified Medical
    • Dental
    • Vision
    • Prescription Drugs
    • Some Over the Counter Expenses
  • May receive a debit card with the funds on it

HSA — Health Savings Account 

In this account, anyone can contribute to it, although it is mainly funded by yourself. To have an HSA, you must be signed up for a high deductible health plan that meets the deductible amount set by the IRS. Included is a list of more important facts about an HSA:

  • Owned by you
  • You can either make deposits or if allowed by your employer, take money out of your paycheck, before taxes
  • You, your employer, your family, or anyone else can contribute
  • The money will stay in the account until you choose to use it
  • Expenses Covered:
    • Qualified Medical
    • Dental
    • Vision
    • Prescription Drugs
    • Some Over the Counter Expenses
    • COBRA
    • Retiree Medical Insurance Premiums
    • Long Term Care Expenses
  • May receive a debit card with the funds on it

HRA — Health Reimbursement Account 

This account, like an FSA, the money put into your account can help you pay for covered health care expenses and eligible medical expenses. Unlike an FSA, all the money contributed to this account comes from your employer and this account is usually connected with a health plan. Here is some more information about HRAs:

  • Owned by Employer
  • Only your employer can contribute
  • The employer can limit the amount that carries over to the next year, or all of it can carry over
  • Expenses Covered:
    • Qualified Medical
    • Dental
    • Vision
    • All of these services are decided by your employer
  • May receive a debit card with the funds on it

The enrollment period for health insurance is a stressful time for all of us, so when you don’t know what something is that is being offered, it is likely that you are just going to skip over it. These savings accounts are highly recommended though and, with a little explanation, are very easy to understand and can come in handy throughout the year. Healthcare expenses are very unpredictable. You never know when an accident or unexpected illness is going to occur, and these savings accounts can help you cut costs and pay for expenses like copays, deductibles, and health products and services. Become informed and save yourself money by learning about these three savings plans.

Please comment down below if you have any questions or thoughts you would like to share!

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