In addition to traditional health insurance plans, health care spending accounts have become a common method of paying for medical expenses. Before enrolling in a health care spending account, it is important to understand how they work.

Identification

A health care spending account is a tax-free savings account that allows you to set aside money to use for health care expenses not covered by your health insurance plan. These spending accounts are typically offered by employers in addition to a high-deductible health insurance plan.

Types

There are three types of health care spending accounts: flexible spending accounts, medical (or health) savings accounts and health reimbursement arrangements. While all three accounts can be used to pay for medical expenses, they vary in terms of who can contribute money to the account and which medical expenses are covered.

Function

Upon enrolling in a health care spending account, you will determine how much money you want to contribute to the account; this money will then be deducted from your paychecks. Your employer might also contribute money to your account.

Benefits

For most health care spending accounts, any money left in the account at the end of the year will simply rollover to the next year. You are even able to keep the money in your account if you retire or switch jobs.

Fun Fact

According to RxHealthQuotes.com, the number of Americans enrolled in a health care spending account has increased steadily since its inception in 2005. In 2009, there were nearly 8 million Americans enrolled in a health care spending account.

Source:

Bureau of Labor Statistics: Health Spending Accounts

ASIFlex: Health Care FSA

RxHealthQuotes: Health Savings Acount Enrollment Reaches Eight Million Americans

More Information:

Humana: Health Savings Account (HSA)

RxHealthQuotes: Top 6 Ways To Save On Health Insurance Costs