Insurance is one of the most confusing things for your patients, and the subject that they usually have the most questions about. Among their options, they might have access to a Health Savings Accounts (HSA) or a Flexible Savings Accounts (FSA). Unless you work in the insurance industry, understanding how these programs work can be confusing.
One study demonstrated that 77% of people made mistakes when signing up for their insurance benefits, and those mistakes will likely cost them money. This means that most of your patients are losing money on their insurance plan while also not maximizing their dental work.
What are HSA’s and FSA’s?
Both HSA’s and FSA’s are programs designed to help cover medical expenses that patients would normally pay out of pocket, and using them provides some great tax benefits, too. Let’s talk about the differences between the two different types of medical spending accounts.
Health Savings Accounts
A Health Savings Account is exactly what it sounds like. It helps supplement insurance plans that have high out-of-pocket costs, so most patients going into it know the position they are in. They are going to incur these costs during the year on a regular basis, so they can set the money aside into a special medical account that provides tax benefits. Patients can even just pay their expenses out of pocket and pay themselves back later with their HSA, which gives them a little bit of tax-free growth.
- You don’t have to pay federal income tax on your HSA contributions
- There’s no deadline to withdraw funds — they add up year over year
- Used for deductibles, copays, medications
Flexible Spending Accounts
Insurance plans don’t always cover everything we would like, and many plans don’t necessarily include things like vision or dental services. Flexible Spending Accounts (FSA’s) let your patients contribute money throughout the year to use towards health-related services that aren’t covered by your plan. Many of your patients are simply unaware of what services their FSA can cover (how many people regularly read up on their insurance?), so it pays to help them through it.
The big benefit with an FSA is that not only do patients not pay taxes on their contributions, but the money that they use to pay for treatment is a tax write off. This can significantly reduce the overall cost of medical care, but they have to be sure to use their benefits by the end of the year. If you’re not already doing so, your newsletter or blog should be reminding patients about this particular issue as the time draws near.
If they do fail to make it in before the end of the year, current regulations allow up to $500 of a remaining FSA balance to roll over into the following year, giving them some extra time to use benefits.
- Used for many health-related costs that insurance plans don’t cover, such as: deductibles, medications, copays, and a lot more
- Great for covering predictable expenses such as braces or glasses
- Can be applied to cleanings and most dental services
|Health savings account (HSA)||Flexible spending account (FSA)|
|Eligibility requirements||Requires high deductible health plan (HDHP)||No eligibility requirements|
|Contribution limit||2017 contributions capped at $3,400 for individuals or $6,750 for families||2017 contributions capped at $2,600 and $5,000 for dependents|
|Changing contribution amounts||Change your contributions at any time during the year.||Contribution amounts can be adjusted only at open enrollment or with a change in employment or family status.|
|Rollover||Unused balances roll over into the next year.||Use it or lose it. Unused balances above $500 are lost.|
|Employers||Your HSA can follow you as you change employment.||Unless continued through COBRA, your FSA is tied to your employer.|
|Effect on taxes||Tax-deductible, but can also be taken out of your pay pretax. Growth and distributions are tax-free.||Contributions are pretax, and distributions are untaxed.|
Make Sure Your Patients Know How They Can Apply Their Benefits
Talking about money can be an uncomfortable subject for most of us, but as it is a huge sticking point in case acceptance rates, dentists should be doing their best to help their patients navigate the confusing world of HSA’s and FSA’s. We’ve provided this handy HSA and FSA fact sheet that you can use to help educate your patients.
~Linda O’GradyTags: FSA, HSA, patient education
This post was written by Linda