Health Savings Account (HSA) and Flexible Spending Account (FSA) are powerful financial tools designed to help you manage and reduce your healthcare costs. While many are familiar with using these accounts for basic medical expenses, there’s a growing movement to leverage them for comprehensive health solutions that promote long-term well-being.
Understanding HSAs and FSAs
HSAs are linked to high-deductible health plans (HDHPs) and allow you to contribute pre-tax income. These funds can be invested and grown over time, offering a way to save for future medical expenses while reducing your taxable income.
FSAs, on the other hand, are not tied to specific health plans. They enable you to contribute pre-tax dollars for eligible expenses, but typically, these funds must be used within the plan year, or they are forfeited.
Traditional Views of HSA and FSA Spending
Historically, HSAs and FSAs have been viewed primarily as accounts for covering out-of-pocket medical expenses such as co-pays, deductibles, and basic over-the-counter items like sunscreen and bandages. This limited perspective often prevents individuals from maximizing the full potential of their health benefits. However, this perspective is evolving as more people discover the broader benefits these accounts can offer.
From Limited Use to Comprehensive Health Solutions
A significant shift is occurring in perceiving and utilizing HSAs and FSAs. There’s increasing recognition of the value of preventing and managing chronic conditions like diabetes and prediabetes using HSA/FSA-eligible health products, including fitness equipment, health technology, and nutritional supplements.
According to IRS regulations, these health products and services are eligible for reimbursement when prescribed by a medical practitioner through a Letter of Medical Necessity (LMN) as a means to cure, treat, mitigate, or prevent chronic diseases, such as diabetes. In essence, if you have an LMN stating that a product or service is medically necessary, you can use your pre-tax HSA or FSA funds to cover these expenses. This can save you your effective income tax rate, which averages about 30%.
If you qualify, you can:
- Pay directly with your HSA/FSA card.
- Reimburse your eligible payment from your HSA/FSA account.
Embark on your journey from saving to thriving—unlock your pre-tax dollars and invest in your health today!
