Augmenting your insurance choice with other available tools In addition to purchasing health insurance, you may consider one of the following options to manage your medical expenses. These options are relatively new and offer some great ways to reduce your expenses on a pre-tax basis, which would lower your overall expenses. However, some of these options will only be available if your employer offers them to you. An HSA is a savings account owned by an individual and used to pay for current and future medical expenses. Money deposited in the HSA is not subject to Federal income tax, which creates a signifcant tax advantage. Unused funds carry over year to year, so you will never lose unused savings, and the funds can be invested while they sit in the account. Contributions can be made by either the individual or their employer. HSAs must be used in conjunction with a high deductible health plan. For more information, please visit http://www.treas.gov/. If you are interested in opening an HSA account, you first need to purchase a high deductible health plan. Please see "where to purchase insurance" for more information. Like an HSA, an FSA is a medical savings account that allows an employee to set aside income from their employer to pay for approved medical expenses. Money deducted from an employee's pay into an FSA is not subject to payroll taxes, resulting in a substantial payroll tax savings. However, unlike an HSA, unused funds are lost at the end of the year. Also unlike HSAs, you do not need to be enrolled in a high deductible health plan to establish an FSA. For a more in-depth explanation, please see http://en.wikipedia.org/. FSAs are offered through your employer. Please contact your HR department if you wish to set one up. An HRA is a medical savings account offered through employers and funded entirely by the employer, not the individual employee. When the participating employee has a medical expense, they are reimbursed tax-free from the HRA (up to a certain limit), providing a significant benefit to employees. The employee does not have to be enrolled in a health plan to receive this benefit. For more information, please see http://www.irs.gov/ | |
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