The ABCs of health care accounts
As if medical insurance is not confusing enough, the various types of accounts available to pay for out-of-pocket expenses may be even more confusing. There are numerous types of accounts and unfortunately the acronyms are all similar….HSA (health savings account), FSA (flexible spending account or arrangement), MRA/HRA (medical/health reimbursement account or arrangement). Due to the confusion, many people don’t take advantage of the accounts, even though utilizing them can be beneficial. Such benefits include income tax deductions and the ability to save tax free for current and future out-of-pocket expenses.
Source: BCBS Blue Care Network of Michigan
If you buy your own insurance, it is a little easier, because your only option is an HSA, and that is only available if you purchase a high-deductible plan. For those who are insured through an employer plan, any of the above-referenced accounts may be available. The chart below provides a concise summary of the various account types.
Do you know to which, if any, of the above accounts you have access? If so, do you understand the rules around what the funds can be used for and any deadlines for when the funds must be spent? (A tip…funds in an HSA can be invested and not spent for years, while there are strict deadlines for when funds in an FSA must be spent.) Mid-year is a great time to review your account(s) and make sure that you take advantage of whatever benefits are available to you!