Ugh, this is so confusing all these acronyms. I’m far from an insurance expert and this is definitely, definitely not advice. It is more like stuff that is collected from a bunch of websites and is a bit of a decoder ring for us:
Flexible Spending Account (FSA)
Flexible Spending Account lets you fill up every year. The employee can contribute up to $2,750 pre-tax to it. The Employer can contribute up to $500. Besides co-payments and out-of-pocket medical expenses, it can be used for over the counter drugs and medical items. There is a huge FSA Eligibility List
The list is actually pretty long and includes some things that are really useful like blood pressure monitors, heart rate monitors, contacts lens care, home medical equipment, heating pads, allergy medicines, aspirin, and sunscreen. You can actually do a search for it pretty easily and there is even a storefront to buy it online at FSAstore.
If you are lucky, your employer will give you a debit card, so you don’t have to constantly submit expense information and receipts. Note that you can’t buy things like exercise equipment unless you have a Medical Need Letter.
You can also roll over $500 of this amount to the next year, so if you don’t have to be so hardcore at the end of the year.
Then there is something called the Dependent FSA with a $5,000 limit that you can use for things like childcare.
HSA and HDHP
HSA or Health Spending Account is way better than an FSA. It can be used for nonqualified expenses like cosmetics, teeth whitening, toiletries so it is much more than a simple FSA. It also allows full rollover, so if you have it long enough, it builds up like an IRA which is great.
The trick is that you can’t get it with any ordinary policy, you need to High Deductible Healthcare plan. Your company can’t just be a small startup to offer this, you have enough participants to allow this.
Note you can’t contribute to an HSA with Medicare
Requires HDHP which means a policy where out of pockets are, in 2020, $1,400 per individual and $2,800 per family. That doesn’t sound so bad, but you have to have an out of pocket expense maximum of $6,900 for an individual and an incredible $13,800 for a family. And there is actually no limit if you end up out of network so tht is pretty scary.
The HSA Contribution limit is $7,100 per year, so that means you have to hope that you don’t anything serious for two years to be fully protected. They do allow a $1,000 additional catchup if you are over 55. So the idea is that when you are healthy, you build up this plan as much as you can. You invest it and then use to cover the out of pocket when you need to.
And of course, the HDHP premiums are gong to be lower.
At 65 years old, you can actually use this to pay your insurance premiums. You can even withdraw although then it is taxable. The complication is that you can’t go to Medicare and contribute to your HSA, so that is complicated.