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    Which Health Spending Account is Right For You?

     

    Contemplation

    By
    June 15, 2014

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    Health spending accounts are like personal bank accounts for your health. Simply put, it’s a way to save money on medical expenses, and it’s tax-free. There are three kinds of accounts: Health savings accounts (HSA), health reimbursement accounts (HRA) and flexible spending accounts (FSA).

    HSA

    Health savings accounts are like a 401(k) retirement account for medical expenses. The catch? You can only have an HSA if enrolled in a high-deductible plan. What you need to know:

    • The consumer owns the account.
    • Anyone can put money into the account.
    • Money taken out of a paycheck for the account isn’t taxed.
    • Money put into the account that’s already been taxed (for example, money that was a gift), is tax deductible.
    • Money in the account can roll over from year to year.
    • The money can be invested.

    HRA

    A health reimbursement account is a benefit set up by the employer. It’s a fund that pays for medical expenses not covered by the health plan. What you need to know:

    • The fund is owned by your employer.
    • The employer decides which expenses are covered by the HRA.
    • Money given to you for medical expenses is tax deductible for your employer.
    • It’s not taxed when used for qualified medical expenses.
    • The employer decides whether leftover money can roll over to the next year.
    • The money can’t be invested.

    FSA

    A flexible spending account is set up by the employer. They own the account, but the individual decides what expenses can be paid. What makes it flexible? It works with most employer-sponsored health plans. What you need to know:

    • Only you and your employer can put money into the account.
    • You can only deposit money into your FSA through payroll deduction. That money isn’t taxed.
    • Some employers let individuals carry up to $500 into the next year. Otherwise, any money left in the account at the end of the year goes back to the employer.
    • The money can’t be invested.

    For more health insurance tips visit bcbsm.com/101 or follow the hashtag #Covered101 on our social channels. If you have a specific question, please submit your query online through our Customer Action Center

    Photo Credit: Regan Walsh

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    2 Comments

    1. Kayla a says:

      What is meant by “you can only have an HSA if enrolled in an high- deductible plan”?

      • Carly Getz Carly Getz says:

        Hi Kayla –

        A deductible is the amount of money you have to pay before your health insurance begins to pay. If your deducible is $500, you will pay most of your medical costs until you’ve spent $500. Once you’ve spent $500, your health insurance will kick in. Typically, the higher the deductible, the lower your monthly premiums are. Here are the current IRS amounts for plans considered high-deductible that work with HSAs:

        -For individuals, the minimum deductible is $1,300.
        -For families, the minimum deductible is $2,600.

        If you have additional questions or want to explore this option, fill out the form in the Member Services section and someone will reach out to you.

        Best,

        Carly

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