The end of the year can be a hectic time, but there’s one thing you shouldn’t overlook during the holiday rush – checking the balance of your medical FSA to make sure you don’t waste your money. Not sure what an FSA is or whether it can help you save on medical expenses? Read on!
What is a flexible spending account (FSA)?
A flexible spending account is a way to set aside money, before taxes, for specific healthcare expenses. These expenses can include insurance copayments and deductibles, qualified prescription drugs, insulin and medical devices, and many other routine healthcare costs. FSAs are like HSAs, although there are some key differences. If you’re not sure whether you have an FSA, check with your insurance company.
What can I purchase with my FSA?
Generally speaking, FSAs cover expenses that are “medically necessary,” i.e. the costs of diagnosing, mitigating, treating, or preventing disease or illness. Depending on your situation, that can mean anything from crutches and eye glasses to ambulance services, hearing aids, and even sunscreen! Be sure to consult your doctor, insurance provider, FSA administrator, and the IRS’s full list of expenses before making any decisions. (Read more here, here, and here.)
What expenses are not covered by an FSA?
In general, FSAs don’t cover costs that are medically unnecessary. For example:
- Insurance premiums
- Over-the-counter drugs, vitamins, and supplements – unless they’re prescribed by a doctor to treat a specific illness
- Cosmetic treatments and products like spa treatments, cosmetic surgery, etc.
What happens if I don’t spend my FSA dollars?
Flexible spending accounts are typically “use-it-or-lose-it” plans. This means that any money left in the account at the end of the plan year will not carry over to the next year – so it’s important to plan carefully when deciding how much to put in your FSA. In certain cases, however, the plan can allow either a grace period or a carryover. For your specific FSA provisions, be sure to check with your FSA administrator.
Still have questions?
Check out this great resource from healthcare.gov!
Image: Pretty Penny, a Creative Commons Attribution (2.0) image from JD Hancock’s photostream.