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Health Care Reform:

Health Insurance & Affordable Care Act

Insured Through Work? Save Money on Health Costs

Your employer may offer one or more types of health savings plans to help you pay for your out-of-pocket medical bills and prescription drugs. These allow you to set aside money tax-free to spend on out-of-pocket medical costs.

Flexible Spending Account (FSA)

The money set aside in an FSA can be used for medical expenses such doctor visits, chiropractor fees, prescription drug copayments, dental care, and vision care not otherwise covered by your health plan. The money can also be used to pay for over-the-counter medicines, but only if your doctor writes a prescription for them.

Requirements: Your employer has to offer FSAs. If you're self-employed, you're not eligible.

How it works: You decide how much money you want to save for medical costs when you enroll for insurance during open enrollment. That amount is divided among all your paychecks. So on each paycheck stub, you'll see an automatic deduction for your FSA. Your employer can also contribute money into this account for you.

Amount you can save a year: Up to $2,550 in 2015. Each year, the government may adjust the maximum amount you’re allowed to save.

How it helps save money: The money you deposit into your FSA comes out of your paycheck before any taxes have been taken out. So your FSA money is tax-free. You can also make withdrawals without paying taxes as long as you spend the money on qualified medical expenses -- health care or products on an IRS-approved list.

Another way it helps: With an FSA, you can spend money that you've committed to the account before you've saved it. For instance, if you decide at the start of the benefit year to put $2,550 in your FSA, and you have a $1,000 expense in January, you can still use your FSA account to pay, even though you have not yet set aside $1,000 to the account.

Warnings: FSAs are considered “use or lose” accounts.You must spend the money you commit to the FSA during the benefit year or you'll lose it. Sometimes employers offer a grace period of a few months to give employees extra time to spend the money. Also, last year the U.S. Treasury Department and IRS allowed employers to let workers carry over up to $500 of unused FSA funds to the next year. Employers can offer you either a grace period or the carryover option, but not both. Also, they are not required to offer either. 

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