Informed consumers have several options to help them offset their out of pocket healthcare expense. Selecting the correct health benefit can be confusing and requires the consumer to understand the differences before making a decision. Employers who offer health insurance allow healthcare consumers to set up either a FSA or a HSA to cover “qualified expenses” to include deductibles, co pays, co-insurance and prescriptions expenses. Some employers will either contribute monies or match employee contributions to FSA or HSA. Both health benefits have tax benefits, although they are not the same.
The following tables will help the consumer understand the differences between FSA and HSA, qualified and non-qualified expenses, how to estimate your contribution and why use this benefit.
Comparing HSA and FSA
| Health Spending Accounts (HSA) | Flexible Spending Accounts (FSA) | |
| Am I Eligible? | Having a High Deducible Health Plan; $1,300 for an individual; $2,600 for a family | No eligibility requirement |
| How much can I contribute? | $3,350 for an individual; $6,650 for a family. If you are 55 and older, add $1,000 to each category above | Capped at $2,550 for you contribution. If your employer contributes to your FSA, the contribution will not affect yours |
| Can I change my contribution amount? | Yes, during anytime in the year | No, only at open enrollment or with a change in employment or family status |
| Can I roll over my HSA or FSA at year end? | Yes, you can roll over unused amounts to the next year | There are exceptions; it is usually a “use it or lose it” and you forfeit any unused balance. A new regulation went into effect in 2014 that employers can offer employees a $500 rollover option.
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| What happens if I change employers? | The HAS can follow you if you change employers | In many cases, you lose the FSA with an employment change. There are exceptions such as if you are eligible for a FSA continuation though COBRA |
| What are my tax advantages? | HSA contributions are tax deductible, but can also be deducted from you pay pretax. Growth and distributions are tax free. | FSA contributions are pretax and distributions are untaxed. |
General Information about HSA or FSA
- The plan may issue you a debit card to use when paying for medical expense. Remember…..it is easy to forget to bring the debit card with you when you have a qualified medical expense. Planning is critical to insure you are maximizing the benefit.
- When using debt card, always make sure you are maintaining all receipts. Some plans will audit plan participants.
- The plan may require you to secure certain documentation to support the medical expense, i.e. doctor prescription, a letter from the doctor to document your condition, etc.…..
- You may be required to submit a claim form to be reimbursed for the medical expenses
- Always secure a list of Qualified Medical Expenses from you plan Administrator at the start of your benefit year
- Always determine if you need documentation to support the reimbursement. You can secure the information and process from your Plan Administrator
- For those consumers who have a FSA, make sure you have used the total amount prior to yearend. Remember…”Use It or Lose It” or have $500 or less in your account if your employer always you the roll over option.
Advantages of HSA or FSA
- All contributions are pretax. This means if you are in a 25% tax bracket and save $100 per month/$1,200 annually pretax, you will save $300 per year.
- When selecting your health insurance plan, determine the premium differences between plans and decide if funding a HSA or FSA can save you any money
- Remember…..you are going to pay for medical expenses regardless if you have a HSA or FSA or not. Better to pay with pretax dollars versus post tax.
How to determine the Amount to Fund my HSA or FSA
- Add up the following:
- Your Deductible amount
- Estimated Co Pays and expenses for:
- Doctor Visits
- Prescriptions
- Dental Expense
- Eye Expense
- Any planned surgeries, etc…
- Any other Medical Expense specific to you
- The sum of the above should provide you with a base line Medical Expense Amount.
- There are no dumb questions. Ask your Human Resource Department for information if you are unsure.
A Summary of HSA/FSA Common Qualified Medical Expenses may include:
| Acupuncture | Eye glasses/eye surgery |
| Alcoholism…Rehab | Hearing aides |
| Ambulance | Hospital amounts not paid |
| Amounts not covered under another heal plan | Laboratory fees |
| Annual Physicals | Medicines |
| Body Scans | Optometrist |
| Post-mastectomy breast reconstruction surgery | Orthodontia |
| Chiropractor | Osteopath |
| Contact lenses | Oxygen |
| Co Pays amounts not paid | Prosthesis |
| Co-Insurance amounts not paid | Surgery, other than cosmetic |
| Crutches | Therapy |
| Deductible amounts | Transplants |
| Dental Exams | Weight-loss program…prescribed |
| Eye exams | Wheelchairs |
The above list is basic summary of Qualified Medical Expenses. For a more detail list of Qualified Medical Expenses, either access the Plan Administrators web site, call the Plan Administrator or your ask your Human Resource Department.
For over-the-counter medicines and supplies, the IRS does not allow HSA or FSA contributions to be used. Talk to your doctor and ask if he or she can write you a prescription for your documentation. Then you can use the HSA or FSA for those items.
For a specific list of qualified medical expenses, see IRS publication 502: (http://www.irs.gov/publications/p502/index.html)
A Summary of HSA/FSA Common Non-Qualified Medical Expenses may include:
| Concierge services | Health club dues |
| Dancing lessons | insurance premiums |
| Diaper services | Medicines and drugs from other countries |
| Elective cosmetic surgery | Over-the-counter medicines |
| Electrolysis cosmetic surgery | Nutritional supplements |
| Funeral expenses | Teeth whiting |
| Future medical care | |
| Hair transplants |
The above list is basic summary of Non-Qualified Medical Expenses. For a more detail list of Qualified Medical Expenses, either access the Plan Administrators web site, call the Plan Administrator or your ask your Human Resource Department.
For over-the-counter medicines and supplies, the IRS does not allow HSA or FSA contributions to be used. Talk to your doctor and ask if he or she can write you a prescription for your documentation. Then you can use the HSA or FSA for those items.
For a specific list of qualified medical expenses, see IRS publication 502: (http://www.irs.gov/publications/p502/index.html)
Be proactive. Take full advantage of what options are available.