Medical expenses, both planned and unexpected, can take a toll on a family’s finances. Even with health insurance, the cost of insurance premiums and out-of-pocket expenses can weigh heavily on your pocketbook. One way to prepare for rising medical costs? Open a Health Savings Account or a Flexible Spending Account where a portion of your paycheck can be automatically deposited into this account. Interested? We’ve broken down the difference between each account type, who is eligible, and what costs are covered by these types of accounts.
Health Savings Account
A Health Savings Account (HSA) is just what it sounds like: a savings account that can be used to pay for eligible medical expenses. If you have a qualified High Deductible Health Plan (HDHP) and meet other qualifications, you can open an HSA. By depositing money into an HSA account, you can save money designated for qualified medical expenses. To make it even easier, you can have money from your paycheck set up for direct deposit.
The purpose of an HSA is to help you plan ahead, budget, and save for any unexpected or planned medical expenses. Although you may be unsure if it is worth it to put money towards your HSA, it’s important to note that HSA funds roll over from year to year and have the potential to be used as a retirement savings tool. Any funds contributed to your HSA account are tax-free, and any eligible withdrawals from the account to pay for approved medical expenses are tax-free, too. If you switch jobs, your HSA account stays with you, so you can continue to use it for as long as you’d like.
You will want to be sure to check with your healthcare provider or plan manager to learn all of the qualifications, terms, and limits for HSA accounts.
Flex Spending Account
A Flexible Spending Account or Flexible Spending Arrangement (FSA) is an option when you do not have HDHP, but you would like to set aside funds into an account for medical-related expenses. Similar to the HSA, you can have money from your paycheck directly deposited into an FSA account. Any money deposited into this type of account is tax-free. While HSAs can be used as a savings account, FSA funds do not roll over, so all funds must be used before the end of the year.
You will want to be sure to check with your healthcare provider or plan manager to learn the qualifications, terms, and limits for FSA accounts.
Eligible Medical Expenses
The following are general categories that are deemed as an eligible medical expense, but we encourage you to check with your specific plan before using your HSA or FSA account funds.
Common medical expenses include:
- Medical equipment
- Chiropractic care
- Dental costs
- Eyeglasses and contacts
- Over-the counter reading glasses
- Prescription drugs
How do I use my HSA or FSA funds to buy reading glasses?
You should receive checks or a debit card when you set up an HSA or FSA account, allowing you to make withdrawals from your account. When checking out on Readers.com™, simply enter in the card information just as you would for any other debit or credit card. Be sure to keep your receipt in case you should be audited.