What Is a Healthcare Flexible Spending Account?

A health care flexible spending account is a type of account offered as part of a benefits package from an employer. With this type of account, you can use the money to pay for qualified medical expenses that are not covered by your group health insurance plan from your employer.

How it Works

• With this type of plan, you can contribute pre-tax money to your account. Then you can use the money throughout the year to pay for qualified medical expenses. You will generally be given a debit card that you can use to pay for expenses like you would normally. This type of account is typically used to pay for things such as co-pays and deductibles that you would usually have to pay out of your own pocket. This can help reduce your out-of-pocket expenses with the tax savings that come with the account.

Use Requirements

• One of the potential drawbacks of using a flexible spending account for health care expenses is that you have to spend all of the money in the account or lose it. Every year, you elect at the beginning of the year how much you want to contribute to your account. Then your employer takes that amount out of your paychecks over the year. If you have any money left in the account at the end of the year, you will lose it and then have to start contributing again the following year.

What You Can Pay For

• This type of account is referred to as a flexible account because it can pay for many different medical expenses. The most common things that people pay for are deductibles and co-pays, but this is not where the spending options end. You can pay for medical procedures that are not covered by your insurance such as chiropractic work, dental visits and vision appointments.

Accessing the Money Early

• One of the attractive features of the flexible spending account is that you can access your money earlier than you would ordinarily be able to with a regular account. If you do not have enough money in your flexible spending account because it is early in the year, you can still take money out of the account. At the beginning of the year, you have to pledge to contribute a certain amount to your account. You can access this money anytime throughout the year even before it is taken out of your paycheck.