Flexible Spending

I think I have written before about the glories of the Flexible Spending Account.

I love having one. The Flexible Spending Account, or FSA, is not the same as a Health Savings Account, or HSA.

The FSA was first introduced in the 1970s, but being that I was under 12 at that time, I was not aware of it or its benefits. It seems to have increased in popularity lately, because health care costs have been increasing. Or maybe now that I know what it is, I hear a lot more about it. I remember hearing about FSAs for the first time during the Clinton administration on Good Morning America, but at the time my husband was a student, and I worked in a private school, neither of which offered any kind of benefit package.

Basically, an FSA is a benefit that employers can offer employees, along with 401(k)s, disability, and life insurance. You agree to have a preset amount removed from your paycheck, before taxes. This money is then set aside for pre-approved purposes, like health spending or dependent care. You could use this money for any health care items that are not covered by your insurance. Your deductibles, your prescriptions, chiropractor visits, and medical equipment could all be purchased with the money in your account. Since the account is pre-tax dollars, you will not pay taxes on the medical expenses paid out from your account.

What I like best, however, is that for those of us living somewhat close to the bone, when an unexpected expense comes up, you know that you can pay for it, because the money is already set aside.

There are two disadvantages, however.

One is that you must pay your expense out of your own pocket first, then be reimbursed by the company who manages your account. This can be tough when you are, for example, buying durable medical equipment like an insulin pump. Maybe you can't come up with the $1600 up front. In these situations, many people put the equipment on their credit card, then pay off the expense when their reimbursement check arrives. I have heard that some plans offer debit cards with a preset amount on them, but I have yet to meet anyone with one of those. I would LOVE one. It sure would be more convenient.

The second, which infuriates a lot of people, is that you must use all of the money that is set aside in your account by the end of the year. Actually, there is a two month grace period, as long as the EXPENSES occur during the year during which the funds are set aside. If you do no use all of your money, it goes away. In other words, it is forfeited back to your insurance company. Which makes sense, since we know how broke all of our insurance companies are, poor babies. I remember hearing on that Good Morning America episode about how it is important to set aside only the money you know that you will use. In other words, low-ball it.

My first real encounter with the FSA was quite by accident. My husband was working at a company that did offer the plan, but I didn't pay attention to it. Then one year, my husband's paycheck seemed suddenly much larger. When I looked at the previous year's pay stubs, I saw that we were having about $150 per pay period taken out for something I couldn't identify. When I called HR, they explained that we had signed up for the FSA, and that these deductions were going into our account.

Well, no we hadn't. The HR department at his employer made the Keystone Cops look like the Navy Seals. I am sure some incompetent boob put our money aside and left the next person in the alphabet alone, wondering why he had no FSA.

I know when not to pick a fight, however. Instead of railing against incompetence, I asked the nice lady on the phone if there was any way to get our money from last year back. The woman sighed loudly in anticipation of actual work. Then she explained, through what sounded like gritted teeth, that we couldn't, unless we could a) find receipts for $3600 worth of medical expenses that we paid AND b) that those expenses had occurred during the previous year. If, and ONLY if, we could do that, could we c) submit the expenses, using the proper forms, before March 1st.

$3600 is a great motivator. And besides, Older Brother had recently gotten braces. I needed only to ask the orthodontist to print out a receipt to get my money back. Which I did. So HA! In your face HR people!

After that, we began actively using FSAs whenever they were offered. Back then eyeglasses were covered (they are not now, thanks to the new health care legislation), so we set aside about $1000 per year.

The year M was diagnosed, we had set aside $3500 for braces. We were a little bummed when the orthodontist told us that she wouldn't be ready for braces for another 18 months. We thought we wouldn't be able to use up all of our money and would lose it.

But she was diagnosed. And we used it, and thousands of dollars beyond. Her second year of diagnosis, we set aside $4000. We used it easily. Now we are setting aside the limit that is allowed starting in 2013, $2500.

So paying for M's pump will be a little easier than it would be otherwise. Which means that she can have a pump sooner. And she can control her bg even better. And she can be healthier.

Which is why, even though it is not perfect, I love my FSA.

That's the name of the game!