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Choose the right health savings or reimbursement plan and save on medical costs

Many workers in the region will soon decide not only on the best health insurance plan for 2023, but also on a health savings or indemnity plan.

“These reimbursement accounts give individuals the ability to stretch their dollars and, in one case, grow them for future needs,” Richard Argentieri, chief sales and marketing officer at Independent Health.

Argentieri broke down three types of accounts that are often available.

1. Health Savings Account (HSA)

This type of savings account helps health insurance members of eligible high-deductible health plans cover deductibles, co-payments and other out-of-pocket medical expenses. Employers and employees can make contributions. Earnings and withdrawals for qualifying expenses are all tax-free. Unspent HSA funds roll over from year to year, so employees can build funds to cover current and future health care expenses.

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An HSA allows account holders to invest their contributions in mutual funds within their accounts. In retirement, that money can still be used tax-free for medical expenses or taxed as income for any reason, without penalty, just like an IRA or 401(k).

Contribution limits: The IRS sets limits for HSAs. In 2023, it is $3,850 for individuals and $7,750 per family in combined employer and employee contributions. Account holders who are 55 or older can contribute an annual catch-up contribution of $1,000

An individual can qualify for this account by having a high-deductible health plan. For 2023, the minimum deductible amounts are $1,500 for an individual and $3,000 for a family. The maximum out-of-pocket amounts are $7,500 for an individual and $15,000 for a family. “This limit does not apply to out-of-network services,” Argentieri said.

“Individuals can establish their own HSAs,” he said, “or they can be offered in conjunction with a high-deductible plan.”

2. Flexible Spending Account (FSA)

This employer-sponsored benefit program allows employees to deduct pre-tax dollars from their paychecks to pay for qualified medical expenses for themselves, their spouses and dependents. At the beginning of each plan year, employees can choose to contribute a certain portion of their pre-tax income to fund their account. “Employees must use these funds within the plan year,” Argentieri said, “however, the plan may provide for either a two-and-a-half month grace period or a carryover of funds up to $610 in 2023. Any unused funds are returned to the employer at the end of the plan year.”

Contribution limits: For 2023, if an employee is married, each spouse can contribute up to $3,050 to his or her own employer-sponsored FSA, even if both participate in the same account sponsored by the same employer. An employer plan may further limit the contributions.

3. Health Reimbursement Arrangement (HRA)

Employees can use these employer-owned accounts for specific medical expenses, such as deductibles, copayments, coinsurance, dental or vision. Contributions are made exclusively by the employer.

Contribution limits: The amount available in this account is determined by the employer. The employer has the option of keeping unused funds at the end of the plan year or rolling them into the following year. There is no minimum or maximum amount.

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