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Save Your Money and Your Health

Choosing the Right Health Savings Plan Account 

Health insurance might seem like an impenetrable mess, with deductibles and co-pays and so on, conspiring to confuse you. There’s a bright spot, though, in special accounts you can use them to pay for your health care expenses. Best of all, these accounts can save you money.

You potentially have three choices, depending on what your employer sets up, if you’re employed, they are:

  • Flexible Spending Account (FSA);
  • Health Savings Account (HSA); and
  • Health Reimbursement Arrangement (HRA).

The FSA is an account set up by your employer but you and your employer may contribute. Your contributions come out of your paycheck before taxes, lowering your taxable income. That saves you money with every contribution.

The HSA is a great choice if you have a high-deductible health plan. Either you or your employer can set up the HSA but the account belongs to you. However, both you and your employer can make contributions.

The HRA is essentially a little pot of money your employer sets aside just for your qualified medical expenses. As an employee, you cannot contribute to the account.

Why choose one over the other? Here is some information that can help:

  • FSA-You can build up a fund to pay for your health care expenses throughout the year. If you have a doctor’s visit or procedure scheduled, you can plan ahead to make contributions to cover your out-of-pocket costs.
  • HSA-Your HSA stays with you when you change jobs. You contribute with pre-tax earnings, earn interest on your money and can roll-over the year-end balance.
  • HRA-If your budget is limited, this is nice because your employer funds it. When you have a qualifying medical expense, you can get reimbursed from your HRA.

When deciding on which account is right for you remember these tips:

  • FSA-You can contribute with each paycheck, making it an affordable way to build up your account. Unfortunately, your FSA does not earn interest but it does reduce your taxable income.
  • HSA-Your money comes out of your paycheck pre-tax and you can use the money for qualified medical expenses tax free.
  • HRA-This account doesn’t reduce your taxable income or earn interest but you can use it to meet your co-pay, deductible and other out-of-pocket expenses.

All three options offer advantages in helping you pay for your health care expenses. So, make sure you take advantage of tax benefits and free money by setting up a plan.

For more information on the difference between health savings plans, access the full article here

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