For those of us who think they are getting the hang of health insurance, check out these babies:
· Health Savings Account (HSA)
· Flexible Savings Account (FSA)
· Medical Savings Account (MSA)
Most of us have heard about them, maybe even had a brief discussion about them, but when you get down to it, do you really know what they are, what they're for, or why to consider them? Unless you're in the insurance business or Human Resources, insurance can be tricky, confusing, and even a little scary for the rest of us.
If knowledge really is power, let's take a look at each one of these three-letter mysteries and see if we can get some of that power going our way:
HSA - Health Savings Account
A Health Savings Account (HSA) is a medical savings account with tax advantages that you can put money in so you can use it later for medical expenses on a tax-free basis. The money in your account is supposed to be used for out-of-pocket medical related expenses but not to pay your health insurance premium. You can use the money for non-medical expenses however, there is a penalty if you do. What's really advantageous about these accounts is you earn interest on your balance, you do not have the "use it or lose it" penalty, and you can roll the funds into a retirement account when you sign up for Medicare. It's kind of like an IRA with a checkbook for paying out-of-pocket medical expenses.
As with any health insurance product, the Affordable Care Act has laid down some rules that must be followed, so there is compliance with "Minimum Essential Coverage (MEC)" but the benefits to the insured are significant:
§ An HSA can lower your tax bracket by up to 10%.
§ An HSA can lower your Modified Adjusted Gross Income, which can result in getting more tax credits.
§ An HSA will allow you to pay out-of-pocket medical expenses on a tax-free basis.
§ HSA funds can be rolled into a retirement account or withdrawn from for any reason without penalty once you reach age 65.
§ HSAs do not have the "use it or lose it" rule.
FSA - Flexible Spending Account
A Flexible Spending Account (FSA) is similar to an HSA, but is offered through your employer. Your contributions are "before tax" money, which means you will save an amount equal to the taxes you would've paid on the money you set aside. Your employer is allowed to make contributions to your account but is not required to. Typically, an insured employee must use the money in the FSA account within the plan year but is allowed to carry over a maximum of $500 to the following year and unlike the HSA, an FSA cannot be used with a Marketplace Plan. Benefits from the FSA are as follows:
§ You can use your FSA funds to pay out-of-pocket medical expenses for you and your family members.
§ You can contribute up to $2,550 per year or if married, and your spouse can contribute an additional $2,550 to an FSA through their employer.
§ You can use FSA funds to cover your deductibles and copayments, but you cannot pay your insurance premium with the funds.
§ FSA funds can be used for prescription drugs and over-the-counter medicines with a doctor's prescription. Insulin can be paid for without a prescription.
MSA - Medicare Medical Savings Account
In their attempt to help you get your health coverage, Medicare works with private insurance companies. These private insurers provide Medicare Advantage Plans, called Medicare MSA Plans that are similar to HSAs which are available outside of Medicare.
Medicare MSA Plans have two distinct parts. The first part is a high-deductible Medicare Advantage Plan that will only begin to cover health expenses after a high yearly deductible is met by the insured.
The second part is an MSA or Medical Savings Account that deposits money into your account that can be used to pay for medical expenses until you meet your annual deductible.
Today, since there are so many options when it comes to health insurance, identifying a reputable and experienced agent or broker to help navigate the plans should be a priority. There are numerous plans with numerous options that will allow the consumer to purchase a plan to meet the specific needs of the individual or family. If you have questions about HSA's, FSA's or MSA's contact Skyline Risk Management, Inc. at (718) 267-6600 to discuss your concerns.