When faced with the daunting task of choosing health insurance, we know it can get a little overwhelming. At MPO Eyecare, we believe that everyone should have access to quality eye care. Unfortunately, many health insurance plans do not cover expenses for eyeglasses, contacts or eye exams. But did you know there are two health care payment plans that can help with you plan for uninsured medical expenses?
The first health care payment plan is called a Flexible Spending Account (FSA), also known as a “flex plan” or “reimbursement plan.” FSA is an employer-sponsored benefit that allows employees to pay for eligible medical expenses on a pre-tax basis. This means that you can allocate a portion of your yearly income to a FSA to be taken out before paying federal income taxes, Social Security taxes and most state taxes. When you incur medical expenses, you simply need to fill out an Explanation of Benefits form to receive a reimbursement check.
One of the great advantages of opening a FSA is that you can plan for your medical expenses throughout the year, while also saving on your taxable income. If you decide to put $1,000 into your FSA, for example, that amount will not be subject to federal income taxes or social security taxes. This means that your taxable income will be lowered by $1,000. However, if you do not spend the amount in your FSA within a year, that money must be forfeited.
The second health care payment plan is called the Health Reimbursement Plan (HRA), which is an employer-funded plan that allocates a portion of an employee’s income to fund uninsured medical expenses.
HRAs offer benefits for both the employer and the employee. Employers can establish a maximum expense for health care benefits and all reimbursements of qualifying claims are then tax-deductible. The contributions that employees make the HRA are also excluded from the employees’ gross income. Any unused funds in the HRA can be rolled into the next year, unlike a FSA. However, not all employers offer a HRA plan, and can decide to opt out of the plan at any time.
If you are interested in taking advantage of these health care payment options, please refer to your employer’s Summary Plan Description to determine if this is an available benefit under your employer’s plan!