Flexible Spending Plans
Flexible spending plans let you set aside money from your paycheck. You can use it to pay for care before meeting your deductible, and for copays and coinsurance afterward. You may also be able to use the money for glasses, contact lenses, medical devices and other types of services. The contribution comes out of your salary before taxes. So, these plans can help you stretch your dollars to cover a larger share of your out-of-pocket medical costs. You often can decide how much to save, up to a certain limit. Your employer may put money in your account, too. Think carefully about how much to save. Some plans don’t let you carry money over from year to year, or from job to job.
Types of flexible spending plans include:
Flexible Spending Arrangement (FSA).
Workers contribute to this plan through deductions from their paycheck. Sometimes employers contribute to the plan, as well. This is a “use it or lose it” plan. You cannot carry money over to the next plan year.
Health Savings Account
Workers contribute to this plan through deductions from their paycheck. Sometimes employers contribute to the plan, as well. The account is yours. You can carry money from one year to the next, to a new job or even into your retirement. But, you pay large penalties for using the money for things other than medical costs.
Health Reimbursement Arrangement (HRA).
Employers alone contribute to this plan. You may be able to carry money over from year to year, depending on the plan. But, you cannot take it with you to a new job.
To manage costs using a flexible spending plan:
Talk to your providers. They may be willing to negotiate fees, take payments in installments, or order less costly drugs or treatments.
Review your family’s medical costs at the end of each year. Include deductibles, copays and coinsurance. Use that information to plan how much you may need to save in your flexible spending account.
What’s a flexible spending plan?
Some employers offer a special type of savings account to help you cover some of your out-of-pocket medical costs with pre-tax dollars. If you have one of these flexible spending plans (FSPs), you can set aside money from your paycheck to help pay for qualified medical expenses like copays, deductibles and coinsurance. You may also be able to use the money in your account for glasses, contact lenses and medical devices. Because the contribution comes out of your salary before taxes, FSPs can help you stretch your dollars to cover a larger share of your out-of-pocket medical costs. It’s important to note that these types of plans are set up and maintained by you and your employer—your health insurer is not involved.