Marriage and Money

How to Address Medical Expenses Not Covered by Your Family Health Insurance Plan

The cost of healthcare is higher than ever, and unfortunately having health insurance still doesn't always guarantee full coverage of a doctor visit, ambulance ride or unexpected trip to the emergency room. In fact, out-of-pocket spending on healthcare-even for people who receive health insurance through their employer-has risen by more than 50 percent since 2010.

Over time, these expenses can add up and put a serious dent in a family's budget, especially if there is a child or other dependent who requires full-time care or has chronic health issues.

Cover healthcare expenses with a Flexible Spending Account or a Health Savings Account

If you're worried about covering ongoing expenses related to your family's healthcare needs, a Flexible Spending Account (FSA) or a Health Savings Account (HSA) could help your family healthcare planning. FSAs and HSAs allow you to put aside tax-free money each year to address medical expenses that are not covered by your health insurance plan.

What's the difference between an FSA and a HSA?

A Flexible Spending Account (FSA) is a benefit offered by an employer that allows you to set aside pre-tax funds for health care expenses. Every pay date, funds are deposited directly into your FSA account and can total as much as $2,650 (as of 2018). However, there's a catch: Because the money does not roll over at the end of the year, you have a set amount of time to use it or lose it.

A Health Savings Account (HSA), on the other hand, is an investment account for members enrolled in a High Deductible Health Plan (HDHP) as defined by the IRS. The HDHP credits a portion of your premium to the HSA and allows the holder to make pretax contributions to the account. An HSA can also be established directly with a financial institution.

Only certain individuals are eligible for HSAs, typically those with high deductible healthcare plans. An HSA, which can be used to pay for copays, coinsurance, deductibles and other out of pocket medical expenses, has a couple of great benefits: It can earn interest and transfers unused funds from one year to the next. As much as $3,450 can be set aside for individuals or $6,850 for families, reducing your taxable income. An HSA is also an effective way to manage healthcare costs during retirement.

What services can an HSA and FSA cover?

Items such as prescription medications or over-the-counter medications, deductibles and copayments, certain medical equipment and diagnostic services can all be paid for with money allocated to an HSA or FSA.

Many families are unaware that items such as family planning options and inpatient treatment for mental health or substance abuse issues can all be paid for with money from your HSA or FSA if they are not covered by a family health insurance plan.

Expenses related to dental care and eye care can also be paid for by your FSA if they are not covered under a dental or vision insurance plans.

Additional low-cost services

There are also many free or reduced-cost health clinics and services that you and your family can take advantage of. The Health Resources and Services Administration can help locate health centers in your area that let you pay what you can afford based on your income, regardless of whether you have health insurance or not. If you're a veteran, you may be eligible for cost-free health care services at VA hospitals and clinics.

If your healthcare coverage does not cover mental health services or substance abuse treatment, the Substance Abuse and Mental Health Services Administration can help you locate affordable or even free clinics and treatment centers in your area.

For more information on budgeting healthcare costs and managing your finances, check out our Learning Center.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

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