This post is part of an editorial series, “Money Matters.“
With the cost of medical needs soaring to all-time record highs, finding ways to save money for this family with a chronically ill child is imperative. With monthly insurance premiums reaching astronomical amounts and coverage covering less and less, I wish I had a magic 8 ball that would tell me the solution to our healthcare crisis in America. But I don’t, so I am constantly searching and seeking out new ways for us to afford our family’s monthly medical needs.
Over the past 20 years, my medical needs have drastically changed. I went from being a single, working professional with a $20 monthly premium who had very little health care needs, to a family of five, with TWO working professionals, with monthly premiums that now hover near the $850 mark with a chronically ill child. And yes, sadly, that is medical only. We pay another $200+ a month to have dental and vision coverage.
Through trial, and lots of error, I have found a couple of options to help manage our out of pocket (OOP) medical expenses — a Health Savings Account (HSA) and a Flexible Spending Account (FSA). Both are plans available through many employers. I don’t claim to be the “insurance guru” in my circle of friends, but they often seek my advice for the best plan options for their families. Hopefully, this post will be beneficial to those that find themselves in similar situations.
The first plan we tried, and used successfully for many years, was an FSA. As insurance premiums increased over time, we found that we needed to move to an HSA. Both have rules and guidelines that must be followed. It is important to understand them before opting to open either account. The last thing you want to do is “lose money” while trying to “save money.”
Flexible Spending Account:
Pros:
-Money is collected from your check pre-tax; saves you money on your income taxes as it lowers your taxable income.
-Can be used to cover things from co-pays to doctors and prescription drug costs.
-Works for most medical needs such as teeth cleanings, braces, contact lenses, eye exams, lab work, and diagnostic tests ordered by your physician, etc.
-Many plans come with a debit card that pays your bill immediately.
-Funds in your account are “front loaded.” This means that the very first day of the new plan year, you can use your ENTIRE amount that you elected to put aside for the year.
Side note: There are even FSA accounts for dependent care that you can open to cover daycare expenses. It works similar to a medical FSA. However, the maximum amount you can deposit each year will vary.
Cons:
-Money is deposited each year with a “use it or lose it” policy. This means that you must use your entire amount of money in the calendar year or it “expires”. Plan out your expenses carefully when it comes to open enrollment. Be cautious the first year or so, until you get a good feel for what you should deposit each month. One month (before kids) I over planned. I had an extra $650 to spend in a matter of days. So, what did I do? I splurged on a pair of designer eyeglasses. Next year, I opted to put away less money, but man, did I look stunning in my new glasses!
-Limit of amount you can put away each year. This varies from year to year. One year we were allowed to put away $4,800. This year our max is much less at $2,600.
-Does not cover “elective” procedures: no teeth whitening or anything that is considered “cosmetic” in nature.
-Must provide receipts to show medical bill. Before the debit card system came around, we had to submit our claims via mail and wait for the check to be cut. This would often take weeks. Once the debit card system started, it was much easier to claim your reimbursement. However, please know that even though you are approved to use the debit card, they can come back and request proof of a bill. Always keep your receipts for this reason.
Health Spending Account: Pros:
-Money is collected from your check pre-tax; saves you money on your income taxes as it lowers your taxable income.
-You are allowed to put away more money each year for an HSA compared to an FSA; our limit last year was $6,200.
-Many use a debit system to allow you to make your payment immediately.
-Can be used to cover things from co-pays for doctors to prescription drugs.
-Works for most medical needs, such as teeth cleaning, braces, contact lenses, eye exams, lab work, diagnostic tests ordered by your physician, etc.
-Money does not “expire”; if you don’t spend it all this year, you can save it for next year
Cons:
-Money is NOT “front loaded.” You can only use the amount of money that is currently in your account. If your medical bill is $500 and you only have $200 in your account, you are responsible for paying the remaining balance of $300 out of pocket (OOP). You can, however, submit the claim for the $300 you spent OOP for reimbursement once the money has been deposited into your account.
-The amount of time it takes for deposit of funds being transferred to your account can vary depending on your employer. It was not uncommon for our monthly funds not to be available until two weeks PAST our payday. It was very frustrating because we paid more than $500 a month to this account, and we were held at the mercy of the efficiency of the benefits office. When your son’s prescription cost can be up to $1,500 a month, waiting even an extra day can put a strain on your budget.
-You must have an HSA eligible plan to open one of these accounts; for us, we had to be covered by a high deductible (HD) plan, a plan that we had to pay 100 percent of all medical bills until we reached our $6,000 deductible.
-Does not cover “elective” procedures: no teeth whitening or anything that is considered “cosmetic” in nature.
As with anything, YMMV (your mileage may vary), always ask your benefit specialist with your employer about the “ins and outs” of its savings plans.
What have you done to help cut down on the ever increasing cost to insure and provide for your family?
