Episode 011 – Health Insurance Benefits and Flexible Spending Accounts

Suburban Folk 0:00
Please listen to the disclaimer at the end of this episode. This is the Suburban Folk podcast, Episode 11, health insurance benefits and flexible spending accounts.

Unknown Speaker 0:15
I’m looking forward to having some real talk. Some real folks.

Suburban Folk 0:20
Hey, this is Greg with the Suburban Folk podcast. Our topic today is going to be health insurance and a specific focus on consumer driven products that go along with health insurance plans like flexible spending accounts, Health Reimbursement accounts, and health savings accounts. Joining me today is my buddy Scott Scott, how you doing?

Unknown Speaker 0:40
I’m doing well. Great, thank you. Glad to be here.

Suburban Folk 0:43
But and thanks for taking some time to explore these topics with me and you’ve have a lot of years in the industry actually be back working in the same health insurance world and in particular, I know that you have managed and operation in these consumer driven products with The flexible spending accounts you want to talk a little bit about your background in the health insurance industry and in particular with the flexible spending accounts.

Unknown Speaker 1:08
Sure. So I had been in the healthcare industry for the last 20 years and I worked for a large healthcare insurance carrier. And in within my experiences, primarily operations building benefit plans, enrolling members as your ID cars, but for nine at 20 years, I also managed operations that administer consumer driven health plan products such as Greg referenced in the beginning, flexible spending accounts, Health Reimbursement arrangements and health savings accounts. And administering that for members who elected those products, product components that go along with their health care coverage.

Suburban Folk 1:49
Did you find when you were getting involved with those products that people understood what they are and use them to a max benefit because I would say when you first got involved, they were white, maybe five years in as far as being a mainstream offering for employer based plans.

Unknown Speaker 2:10
I’d say that’s the the, the Health Savings Account. The HSA was really one of the first consumer products that’s kind of evolved. And I would agree when I first got involved, actually, I didn’t know a lot about the products as at all when I took over the operation. So I certainly learned a lot in a short amount of time. But what I found was I found them to be very interesting in what the products did and how they helped employees and their families with their, you know, health care coverage, help defray the cost of their out of pocket expenses. So, but what I found is most people including employer groups and brokers, who, you know, really facilitated arranging, you know, working with employers to purchase health care coverage for employees and their family. Families didn’t really have a good understanding of the product. So it’s definitely in the beginning. It was certainly they were new. But I think over time, still, people don’t really realize what they are. And when they’re offered, I think that people probably don’t take advantage of them because they think what they don’t know they kind of fear, right? They kind of stay away from I don’t that involves that sounds scary. So they want to stay with what they’re comfortable with or tried or true. Versus kind of exploring how these products can really save them money in the long run. And I think the idea from

Suburban Folk 3:33
the insurance plan perspective is if we have these types of accounts available, and put some of the responsibility on the consumer, then maybe they’ll be a little more conscious about what things cost and where the money is going and coming from, unfortunately, with today’s state of health insurance, where it seems like every year for folks with our open enrollment, you You’re either seeing a premium increase or a higher deductible or things like that. So I think that’s one way that it’s become more prevalent. But that was one of the ideas when these were first introduced, right that the consumer would be helping, if you will manage costs, because they have a little more insight into where their dollars are going. Is that a fair way to categorize their their introduction into the market?

Unknown Speaker 4:25
Yes, I would say that’s fair. So over time, when I first got into the business and the business of healthcare HMOs were really prevalent at that time. And again, from an HMO, you enrolled in an HMO and you had typically very low co pays, you know, primary care physician office visit copay, you might have had a separate copay for a specialist visit, and perhaps co pays for pharmacy generic versus brand. And so if you weren’t feeling well, or whatever the case may be, you go to your doctor and emotion might have a 10 or $20 out of pocket expense. On the same if you went to the emergency room, you might have a higher copay of $100. And so people didn’t really give a lot of conscious thoughts when they were seeking medical services because, you know, they’re paying so little out of their pocket because you know, I pay a premium, right, I’m paying a premium for my health care coverage. And so that, you know, gives me that coverage. And so if I’m not feeling well, or whatever the whatever the situation may be, I want to go seek medical care and don’t think about the cost. And over time, as medical costs have increased, employers have really had to look for a way to help make healthcare affordable for them to continue to cover their, their employees at large. And so over time, as you know, kind of moved away from the HMO to more of a PPO, Preferred Provider Organization where you have a deductible and, and or even higher cost pays, where, again, members are taking very more of the responsibility for the cost of their medical care. These products were introduced to help them defray those costs either by the employer helping to fund their health care through through an HRA. We’re allowing the employee to save money towards their out of pocket expenses, but get it to take a tax advantage, particularly the FSA and the HSA.

Suburban Folk 6:30
Yeah, and that’s a good segue into the health plans themselves. We wanted to get this recorded now because a lot of folks that were working for employers who have a January 1, open enrollment are likely having to pick those benefits right now. So hopefully some of the information we go over is helpful for folks that are still in that period. So you mentioned HMO, and I think for most people, that’s where their starting point is, of what health insurance Is, like you mentioned, it’s mostly your co pays. Typically you’re not dealing with deductible. So let’s try to break that down a little bit. The main thing I think that people talk about for an HMO is it’s only you’re in network doctors meaning they have to have a contract with whatever insurance company your employer is using. So if they’re not in network, then they don’t have a contract and get no benefit from it. And then if they are in network, it would be the negotiated rate. And typically, the patient cost is going to be in the form of CO pays. I think in recent years, again, as we tend to see less rich benefits on the patient side. There can be deductibles, maybe even coinsurance, but the sterically that’s not as common and then in there certainly much less than the other couple of insurance products that we’re going to talk about anything else that comes to mind for the HMO, that sort of a staple of that type of product.

Unknown Speaker 8:08
Again, I know I think you’re covered, it’s you know, co pays. And again, as a service evolved the you might see $100 copay, or maybe even a slow deductible one some higher costs or was like inpatient. But essentially is if you say, a network and see a participating provider, physician or hospital, you know, your, your out of pocket is traditionally, some sort of copay

Suburban Folk 8:35
tends to be more predictable, I think, for what people are used to with insurances, which I think is a theme again, as we shift over to talking about the spending accounts that are available. predictability, is attractive for for when people are budgeting, and maybe is again, one of the reasons why they tend to get turned off by or don’t want to engage in Some of the other products but as we’ll discuss, you can actually combine even if you go into an HMO that has some of that predictability, a flexible spending account or against some of the other arrangements with the other types of products that are available. So I understand why people go there, especially if you have certain known health costs that are going to come up. And then you know, depending on your family situation, or just own risk tolerance would play a part into whether or not you’re going into one of these options. But in more and more, I think people find that they don’t even in all cases, have an HMO product that’s going to be offered by their employer, depending on the size of the employer, the way that they’ve structured their plans, but it is, I think, sort of the most straightforward version of a health insurance plan. And next is the PPO which you mentioned. I did the HMO. So Scott, why don’t you go ahead and give some of the high level characteristics of a PPO plan.

Unknown Speaker 10:01
Sure. So a PPO plan, typically also referred to as Preferred Provider Organization is really a health plan that offers the consumer and in and out of network benefits. So one of the constraints of an HMO is that you have to see participating providers who are participating with the insurance carrier that your insurance is offered through. And so you don’t have a lot of choice. You know, you may have you know, if your employer offers, you know, one carrier a this year and your doctors participating with them, and they switch to another carrier for the new plan year and your doctor may not be participating in unless you’re going to completely pay out of pocket for those services. You’re really restricted to who you can see, although, you know, again, most HMOs have a pretty broad network, but in my experience, I have seen that happen where, you know, members are coming on for the first time with an insurance carrier and the physician they’ve seen for 20 Yours is not part of that network. And so they had to make a know. Pick a different doctor. And so the Preferred Provider Organization really allows more of a flexibility. So if your doctor or your hospital or outpatient service center doesn’t participate, and you want to choose to go out and network and pay higher out of pocket, you can do that. And then typically, with ppas, you see more of a deductible and coinsurance benefit arrangement versus a copay. So you may have a $500 deductible that you know, so your first $500 of approved services, you pay out of pocket and then once you meet that deductible, then it kicked the CO insurance kicks in so then services after that, that your insurance carrier will pay typically 80% of the cost and then you pick up the other 20. So, PPO is give a little bit more flexibility and then plus with the darktable added on They call it a lower premium, perhaps, than the HMO. So it does afford that more flexibility.

Suburban Folk 12:10
Yeah, and some things, I think it’s worth breaking down those costs and how that can work. Because people’s eyes sometimes can glaze over, I think when you get into double versus coinsurance that in the network versus out of network with the deductible, that’s part one, if you will to be met before the benefits start to kick in with the exception of your annual visit. And there may even be some other things that are part of the Affordable Care Act that are required to be covered. For example, I know for you know, the women’s exams, there are certain ones that would be covered regardless of the type of plan that you have. But generally speaking for any other sick visit or anything that you have, you’re going to either have a copay there or it would go to your deductible, but actually that people should just be aware that there can be a coinsurance like you said, I agree that 80% is what is covered, and then you still have a 20% after that, that has to get paid. So when you’re looking at your maximum out of pocket, you need to make sure that you understand that it’s not just the deductible and then that’s it is very possible that there’s a coinsurance is going to apply to certain services in patients probably the most straightforward example where that’s going to happen before it gets covered at 100%. Which, again, going back to that member, responsibility, need to be aware of that. And also, again, if you have some of these other spending accounts that can help ease that payment and something else I think that people don’t necessarily realize when you talk about the out of network benefits is because they’re out of network, they do not have a contract with your health plan. So the pain is based on what’s called usual and customary. So real world example, let’s say you go to the doctor and they charge you $200. But your insurance as usual and customary is $100. So let’s say it’s that 8020 split Well, in this example, they would be paying $80, you would be responsible for the $20 in that 20%, but also that additional hundred dollars, you know, if they did charge you 200 and my example, because they don’t have a contract with your health insurer, they’re not bound by those particular billing practices. So that I think that’s just something to be aware of that it is definitely an advantage to have some of those out of network benefits. As you mentioned, if you’re seeing a particular physician that you want to continue to see or if you have, you know, a certain issue going on where somebody that isn’t network, maybe really, really trust somebody that’s out of network and things like that. So you do have some coverage, but there are definitely limitations. To that, and one other, I think that maybe we take for granted working in the industry is there are separate deductibles and coinsurance there as well. So it’s not a combination of those deductibles, they will operate completely separate from each other. Any other thoughts on what other considerations may pop up as far as member responsibility that people sometimes may forget about?

Unknown Speaker 15:27
Yeah, so to your point, so again, separate deductibles, and often difference coinsurance. So if you go out or that work, once you meet your deductible, the cut you know, the year your health insurance may pick up 60% of the usual customary and then you’re responsible for that 40% then plus anything above you and see that the provider build. So again, that’s something to take into consideration. And then another thing with ppl that people may not be aware of if you go to hospital, emergency room outpatient setting. A lot of the calm the pearl providers, the pathologist, the ER doc, the anesthesiologist, the labs and the radiology, oftentimes of those services that operate within a hospital kind of operate independently and often don’t have any type of contract with the insurance carrier. And so they, you know, they will bill your insurance and the insurance will fly the out of that work, you know, benefits and pay the, you know, if you’ve met your deductibles have already met your deductible, they may pay 60% and then you will get billed the balance the balance, but typically if you see go to a participating hospital or participating the service you know, like an outpatient service center and are seen by nonprofits. A payment provider. If you get balanced build and call the insurance company, then they’ll go ahead and pay the balance because they hope they’re holding you the member harmless. But sometimes people aren’t aware of that and they get the bill and they’ll pay the difference. So that’s probably a consideration with a PPO if you are staying in network for for services, you may be seen by a non participating provider who will balance bill you because again, they’re not contractually bound by the payment your carrier makes. And but if you call your carrier, they’ll typically then they’ll pay that balance for you because they’re holding you harmless because you follow the player then what

Suburban Folk 17:38
I would second that that is a great tip that people are probably not aware of. And let’s be honest, if it’s in, especially if it’s in an inpatient setting, the last thing on your mind is when somebody enters the room, Hey, are you participating with my network? So it’s extremely frustrating. I think when you see that bill, come Through

Unknown Speaker 18:00
or without anesthesiologists is about to put you under the last thing you’re thinking about is, are you participating with my insurance? And the lot though, so

Suburban Folk 18:09
yeah, so if someone finds themselves in that frustrating situation, just like you mentioned, yeah, call your insurance up. And granted, you shouldn’t have to deal with it. We’re going to go into, you know, what all could make the health system better. But that is definitely an insider tip to don’t just assume that you do, oh, that cost, talk to your health insurance carrier there and make sure they understand the scenario and more often than not, they will not hold you accountable. Because of all the reasons we mentioned. You’re just trying to get better. You’re not controlling who’s coming into the room, you’re leaving that to the hospital or you know, the whatever provider that you’re at, so I would get I would definitely second that. I’m moving on to What has become way more common I think as a an offering from the employers are the qualified high deductible plans. And these are in most cases similar to a PPO. But they, as the name indicates would have a higher deductible. That deductible needs to be met for nearly every service service. Before you would see the benefits start to pay out again without exception that I mentioned with your annual visits, which is part of the Affordable Care Act. So the best example of a difference between a more typical PPO versus these high qualified plans is when you would go in for a sick visit or if you go see a specialist. You know, historically, people are used to a specialist copay or you’re just your PCP, your primary care physician copay. With the high deductible plans, it’s going even though services are going to go to that deductible and I think that you unfamiliarity is where people can tend to get scared at what can be an unpredictable cost. That whenever you go, it’s not I pay my 10 2030, whatever your copay happens to be, it’s going to be the contractual rate with that doctor or again, if it’s out of our camps, basically what they bill all together. And I think the other thing that is kind of foreign to people is around the pharmacy, which typically when you go to go pick up your prescription, you’ve got your generic level copay, you’ve got your brand level copay, and then you’re off your non formulary, co pays, and so on, there can be different tiers. But with these high deductible plans, they go right to the deductible as well before you that get to a copay base payment system. So those are the main differences that go along with these hybrid Plans again, Scott, keep me honest here. Is there anything else that I missed? I know, we talked before recording this about the limits. And admittedly, I don’t have it in front of me. I don’t know if you happen to have yours. So anything else around these high deductible plans?

Unknown Speaker 21:16
I think you got it right. So for the high deductible health plans, preventative service, so you again, an annual physical is usually it’s covered at 100% by your carrier, there’s no out of pocket because again, part of the health care system today is pullers, you know, a lot of wellness, right? They want to incentivize you as to you know, to stay healthy. And so part of that is, you know, if you have to pay a deductible, or pay out of pocket to go have a wellness exam, you’re probably not going to do it because, you know, our, our I guess our culture is you go to the doctor when you’re sick, not when you’re well. So that’s part of the incentive to do that. And from a high dollar Very similar to a PP, you know, go back to the PPA for just a second because oftentimes a ppl will also have co pays for like a doctor’s visits or prescriptions. And you’ll see more of the deductible coinsurance for services like outpatient inpatient, but for the high deductible, the limits are for 2019 the minimum deductible was 1300 $50 for an individual 2700 for a family, and that goes to 1400 dollars for individual and 20 $200 for a family and 2020. So, for qualified high deductible with the deductibles, Lauren that that it doesn’t qualify to be a qualified high deductible that will be a regular PPO.

Suburban Folk 22:48
One thing to touch on that you just mentioned that we didn’t hit as well for the PPO is that individual versus family deductible and I think that’s also something that people can get a little confused on. With. So, individual deductible, if I’m a family of four, and I have a procedure that I hit my deductible, let’s let’s stick with the 1300. If then my spouse goes in for a procedure that’s going to hit that same deductible, you just because you had the individual deductible on my service, and they’re still that family deductible that has to be met. Now continuing this scenario. In most cases that I’ve seen, I don’t know if there even is an exception, the family deductible is basically twice the amount of what the individual deductible is. So if you have more than two people on the policy, then whatever else happens, then you’re into the CO insurance regardless of who the person is. But up into that point, it is at that individual level with the cap of the family deductible, so that can sometimes get a little bit confusing, I think As far as understanding the difference between the individual and the family, and the coinsurance works the same way that they tend to be the family is double the amount of what the individual one is. And then whatever combinations you have to get to that point, or if an individual gets to the individual point, they would see the benefits started to pay out. So I think that is worth making sure people understand that as they’re adding up what their potential cost could be.

Unknown Speaker 24:28
Yes, and I think with the PPO and the, and the qualified, high deductible again, that’s where the consumerism comes into play because you as the as the consumer, you really have to pay attention to what you’re paying out of pocket and, and, you know, whether you’re receiving your explanation of benefits, you know, in the hardcopy in the mail or you’re receiving electronic electronically through a member portal, you’ll want to pay attention to watch your you know, it’s being applied to doctor but what you’re paying out of pocket. So you You can track that sort of thing because again, you know, doctor may bill you for something that was applied to your deductible when you know because sometimes it takes a while for claims to catch up with, you know, in the system to, to reflect that you’ve actually met your deductible. So it’s really important to to really track what you’re paying out of pocket and and monitor that because you know, mistakes will happen or sometimes it’s just a timing thing and get a provider may bill you when it’s just a timing thing when the claim so.

Suburban Folk 25:30
So I would argue that we’ve made the case for why spending accounts can be useful with the deductibles, the coinsurance, the CO pays, we didn’t even hit vision plans and dental plans. But the way the current health insurance products are going there are definitely these combinations of patient responsibilities that then brings these Spending Accounts into the picture. So moving on to the those particular offerings. The three that I am aware of are the flexible spending account, the Health Reimbursement Account and the HSA that maybe we would get the Health Reimbursement Account out of the way first, just because that you only have that available if your employer elects that type of a plan that is very specific, that it has to be an HR a base plan. It is a plant that is employer dollars that are put into your account that you can use. And there are some options as well. Scott, you want to go ahead and give some additional you want us to that HR a plan?

Unknown Speaker 26:44
Sure. So for the for the HRA, as Greg said, When employers are offering a PPO plan, and again is we will evolve I think in product offerings or in benefit offerings and 10 years ago, your employer may have offered you a HMO product PPO products, and then paired it with an HR a because again to help help their employees absorb that out of pocket expense that they may not have previously have had to deal with. So from an HRA, the employers funding that so they may, they may elect a plan that has a, say a $2,000 individual deductible $4,000 family. So if you’re used to an HMO and only paying co pays, now you’re faced with health care coverage where you’re responsible for the first $2,000 if you’re an individual and up to $4,000, if you have a family, and so the HOA dollars helps kind of to frame that out of pocket and so the employer funds that so they may offer $1,000 for an individual and $2,000 for the family from a generic funding. So What will happen is you go to have a medical service and the doctors apply the claim comes in and, and the member responsibility is $500. So when that comes clean comes in and you are responsible for $500. The Hoa will pick up that $500 so you don’t have to pay that out of pocket your employer has funded that. So that’s the benefit the HOA Hoa. It’s important again, it’s employer funded. So if you are a relatively healthy person and you don’t, you know, have very many services and only use $200 of your HRA and 800 slumped over at the end of the benefit year the employer keeps up mister money. So so the risk to the employer it’s this little because again, they’re helping fund it but if you don’t use it then they they save it.

Suburban Folk 28:54
Is there a rollover for HR as I know there is for FSH but It’s been a little while since I’ve dealt with the HRA. So I’m honestly not sure if there still is. And what I mean by rollover for folks that may not be aware is when that plan your ends, and you go into the next year, there are certain accounts that you can have $1 amount at last check for the FSA, it’s $500 that then can be rolled over and use for the next year. Do you know if that same rule applies or how that works on the HR side,

Unknown Speaker 29:29
so the HR the employer as part of the structure of HR and how much they want to fund, they also collect her over a certain amount into the next plan here. So I’ll just stay with the individual mouth freeze of you know, explaining So again, if the if you have an individual deductible, 2000 the employers funding 1000 annually us again 200, there’s 800 leftover, they may roll that whole 800 over into the next year, they may roll 500 over so you can kind of build on that. So then the next year, this this they they roll over $500 of any unused Hoa. So then the next year you have 1500 dollars available, and your deductible stays at 2000. Now, you know, as you’re accessing services and incurring costs, now you have 500 additional dollars and that plan here to defray your out of pocket.

Suburban Folk 30:22
Right. So the very basic math that I would encourage folks to do is see what the amount your employer’s putting into that HRA consider it for what your deductible is, and then when benefits would start paying out, you know, compared to what your other options might be, if you are relatively healthy, and the situation of your family overall, and it might make sense more so than if your employer has an HMO, for example, that if you’ve got those HRA dollars, and just continuing the theme that may seem a little scary when you’re faced with a deductible Rather than just the standard co pays, it can work out to, you know, for example, okay, this equals this many doctors visits a year before I would even be spending my own money versus the reimbursement. So every plan is very unique. But I think that is at least an exercise that’s worth doing and your employer’s open enrollment happens, and you’re figuring out how each of the plans would fit into your family’s particular situation. And I think that’s probably a first place to start, how much money are they putting in, compare that to the deductible, then see what the gap is of how much of your own money still would be needed to fulfill the deductible and then the benefits start kicking in after that.

Unknown Speaker 31:47
And then I would say part of that calculation is also looking at the difference between the premium you would pay for an HMO plan for an individual or family coverage, versus what it would cost for the PPO because I Typically, you’re going to find that the premium that you would pay per paycheck is going to be less for a PPO versus an HMO, because when you’re electing the PPO you’re assuming, or the cost share, and the frame some of the risks on the employer side. So if you factor that difference in over, you know, typically 26 pay periods a year, you’ll might find that that savings in the difference between the premium if you were to have to pay out of pocket may also help offset that costs where if you actually had to, you know, use up $2,000 or two bottles, maybe less out of pocket than you were expecting when you compare the cost of the premium.

Suburban Folk 32:48
Yeah, exactly. Yep. Premium Plus deductible plus the other possible out of pocket, minus the amount that you’re getting, in particular, in with the HRA, the money that’s coming in from the Empire. Absolutely. And as far as when you have access to those funds, when does an employer typically put the money into your account? Is it all at once? Or is it more like the other options that we’re going to talk about here shortly where per paycheck a certain amount is going in, and then you have it available at certain times.

Unknown Speaker 33:21
That’s the employers choice when they’re setting up the benefit. But in my experience, most of them make the jury funding available first dollar, meaning the first time you incur an expense that complies to your deductible, the HR is going to pick that up, but there’s there’s various options. The employer may require you, the member to pay the first $500 of the deductible, then they’ll pick up the other thousands and then and then the employee picks up the 500 with the back end. But typically, it’s first dollar okay, but guaranteed feared rolling in the nature a if your employer is offering a thought these are good questions to ask. And simply that’s outlined in the benefit offering so you can make an informed decision.

Suburban Folk 34:09
Yeah. And I think especially if it doesn’t have being on the front end that should help with just budgeting in general for the install available right, then you’re not having to worry about when you have a particular doctor’s visit or anything like that. It’s just it’s there for the year versus if it is incrementally added through the year, you know, something to keep an eye on, as the year goes through and whenever you’re doing your benefits,

Unknown Speaker 34:31
but it’s just going to add another thing to consider with the HR a particular if the employer offers the rollover, if you’re going into year two of your HRA and you know that you have funds available, they’re going to roll over sometimes those rollover funds aren’t available until after the first 60 or 90 days of the year. And that’s only to allow claims that you may have occurred at the end of the benefit year to come in and be processed and paid before they roll it over. So if you are planning some type of medical service, as you’re anticipating will be, you know, apply have a large out of pocket expense initially in the new plan year. You may also want to consider that as you’re planning.

Suburban Folk 35:14
Yeah, that makes sense. And then before we leave the HRA, actually, I have to tell a quick story for how I use the HR and at least I practice what I preach. One other thing to consider is, if you are leaving your employer and there is money on the table, that same user was applies except it’s going to apply to the last day of coverage of that plan. So whatever dollars available you can spend and the HRA has some extra limits I believe on what you can purchase as compared to the flexible spending account and the health savings account. But there are certain over the counter things that you can get and then your check vision check. Dental and see what applies. And actually, when I was leaving a company that Scott and I worked mutually at, I was using every dollar that I could get. And he let me know that he had to have a special meeting about the purchasing habits of people that had these accounts to make sure that the amount of things that are being purchased and the frequency, if there were supposed to be any limits to that, so I ended up getting getting you an extra meeting, I guess, on your calendar for my particular situation, but just to show that I practice what I preach, as far as using the benefits to their fullest, I was definitely doing everything I could because we had that rollover, like you mentioned that from year over year. So if memory serves, I mean, it was over like $1,000 had to use, you know, within a month’s time. So, you know, I would definitely encourage folks to look to see where they can use those dollars if you get to that use it or lose it point and there’s a site called Fs store.com that is sort of shorthand for the things that can be covered. It’s really a great business model for people that are getting to the end of the year, like right now. And they’re looking to spend those dollars rather than just haven’t go away, they have all the products that you can be assured will get reimbursed, and are part of these types of plans. My trick is, go and look to see what they have available that you know, would be covered and then go to Walmart, Target, something like that. They typically have the same items cheaper. So you can still get them reimbursed same exact way. But you’ll know based on a site like that FSA stores that they’re going to be covered. So you don’t buy all this stuff. And then you submit it for reimbursement and it doesn’t count because I know in the last five to 10 years, there has been some ratcheting down on the types of items that you can get reimbursed with these types of plans.

Unknown Speaker 37:54
Yes, I agree. And also if you ever take notice if you go to Target or Walmart and you something pretty well, you know, a vitamin or band aids, if they’re reimbursable. From an HRA, or FSA or HSA, there’s usually some kind of low indicator after the item on your receipt. And that helps to substantiate that, you know, that is a eligible expense to be reimbursed from an HRA or an FSA because again, part of the administration of these products by any administrator we have to again making sure that it meets the requirements for the for the HRA, FSA, just say they have to be qualified medical expenses, and part of the administration is substantiating that you’re actually, you know, the, the money that you’re asking to be reimbursed for is truly a qualified expense. And also to Greg’s point. There’s only so many blood pressure meters that one person really needs. So I think it’s reasonable, we set a little It was reasonable to have one for your office and one at home, but you probably don’t need four or five. So

Suburban Folk 39:07
I think that’s probably a good a good threshold. I was I was okay with the outcome.

Unknown Speaker 39:13
So So yeah, so he had to turn to other things for his Christmas list shopping list.

Suburban Folk 39:18
Yeah, exactly. So moving on to the FSA. I think this is the one that people are probably the most familiar with FSA standing for flexible spending account. To me, it is the one that can be attached if that’s the right word to the widest variety of health insurance plans. For example, you can have an FSA with an HMO you can have the FSA with a PPO, you cannot have it with the HSA at the same time. So likely if you’re doing one of those high deductible plans, you’re probably not going to use it in conjunction but it’s pretty straightforward in that you will like the amount of dollars that are going into the FSA. It is your money. So you know how it’s being allocated. You know, there are certain limits. And this is one that you have all of the dollars available to you as soon as the plan starts, even though you’re paying in paycheck over paycheck, which is kind of nice from a budgeting standpoint that you don’t have to worry about the types of services that you have planned for yourself in the year based on whether or not the funds be there. They’re there all year, but you’re not having to preload those funds in to make sure that you have them available. So that is the high level for FSA. Again, Scott, what did I miss as far as some of the the highlights of nfsa?

Unknown Speaker 40:46
So, so for an FSA, so it’s a way to save on your taxes. So because it is really a tax product so you can put money into your FSA, tax free and utilize tax free. So Again it’s all about the consumer right planning knowing what your I was saying you’re predictable medical expenses are throughout the year so if you know that typically be you know for yourself will just stay with the individual for the example that you know you typically spend $500 a year in qualified medical expenses. That’s a good opportunity to put $500 into a flexible spending account. So as again, Greg said, they take that $500 and they break it out over again if you get 26 paychecks a year and they deduct that from your you know from your check but pre tax so if your fear broses you know, $2,000 a check then there la you know, the doctor that portion so it is a way to save with your taxes and then

Unknown Speaker 41:47
have a little bit more money in your paycheck.

Suburban Folk 41:50
Yeah, agreed and even just to take that further with the math, because I think sometimes people here pre tax but it doesn’t really translate for them. So hard dollar That’s if I make $50,000 a year and I have a 20% tax rate that’s probably pretty high. But anyway, just for the the ease of the math, you know, I can what that that, would you say thousand dollars that would come out? Um, you know, otherwise if I didn’t have that contributing into the pre tax it’s only $800 coming out of my paycheck so you’re almost getting a discount, if you will, when you consider that for it to get to you after it’s taxed is actually going to be less money so there’s even a little less hurt from your paycheck when we’re talking about those pre tax dollars. So I think that again is worth using, you know, world example although I think I went way high with with my example on the tax bracket. I try to keep my math easy as I say yes,

Unknown Speaker 42:59
but You have to plan carefully with a FSA because if you don’t use it, you lose it. Your employer keeps it. So it’s you know, from an employer perspective, again, as Greg said that if you’re going to contribute $1,000 for your benefit year, that thousand dollars is available to you day one. So if you for whatever reason, have high medical expense early on in the plan year in January, you have that money available to you. And it just again, they can continue to come out of your your paycheck and even amounts throughout the year. And then if if you leave that employer, you don’t know that employer that money back because they haven’t had an opportunity to take that money out of your paycheck. But on the flip side, if you put $1,000 in and you have a relatively healthy year, and you don’t incur the expenses that you anticipated at the end of the year, then they they can keep that money.

Suburban Folk 43:57
Yep, exactly. So that is something to Keep in mind, actually, the first time that I started using nfsa was when he started having kids. So we knew that there were going to be those expenses. So we made sure that we use the flexible spending account for that eventual inpatient stay. And with our second is actually when I was transitioning jobs. So I had that extra amount available and a unique situation. I didn’t even know this until I was in the situation. You can actually elect to pay for Cobra with a flexible spending account just like you can with any other of your health plans. So it’s probably a pretty unique situation where that makes sense to extend the amount of time that you can have your FSA but for me, it happened to land right when we had our second child so it did make sense to pay the Cobra amount so that for that extra month, we could have those claims reimburse and ultimately Didn’t even pay in the whole amount for the year for for that FSA. So we actually did okay there that didn’t have to pay in for our paycheck the whole year’s contribution, but had all the funds available for something like the den birth of a child where, you know, there’s going to be probably some pretty significant expenses for that delivery cost and as a subsequent costs from there, and the other things that we mentioned, I think at the beginning, but again, there are dental services that you can use these flexible spending accounts on vision services. So if you wear glasses, for example, and you know, it’s time to air, that’s something that you can plan for for the FSA. Another example, as far as the limits are concerned, if you have a kid that’s getting ready to get braces or something that’s going to be pretty expensive, and, you know, there’s going to be a pretty significant out of pocket costs. You know, make sure you have those on the radar and, you know, they’re going to be certain years. It’s very powerful. You’re going to want to max out the FSA. And to that, Scott, you have in front of you what the max limits are for the FSA.

Unknown Speaker 46:08
Yeah, for 2020. It’s got to contribute a minimum of $260 and the maximum is 2700. So again, it’s a great, a great, I’ll call it a tool or a product to relax. If you have, again, predictable, historical out of pocket expenses, not only for your medical again, it’s covers medical, prescription dental vision. And again, if you have a PPO, you can put a charger deductible coinsurance or co pays. And Greg, I think you said a little bit ago like with an FSA, you can pair it with an HMO. You compare it with a PPO, you can even pair it with a PPO where the employer offers that HRA I you just have to be careful there because if you’re if your employer is offering a PPO and an HRA, and you’ll actually That you can still elect the FSA and say some, you know, particularly if you have, you know, our pocket expenses that you want that the HOA will cover all of it. So if your deductibles $2,000, and he is going to cover 1000, but you know, historically you spend 1500 dollars, and you want to put $500 into your FSA, the only thing you had to be aware of and understand is how your employer elects to administer those two together because that’s considered what’s called a stack product. And most times, employers will, you know, stack the HR a first meeting that all of your eligible expenses that are reimbursable from the HR a, come validate re first before you can access your FSA. So again, just want to be careful

Unknown Speaker 47:50
with how much money you’re putting into your FSA.

Unknown Speaker 47:55
So just something to be aware of, and again, and also how I believe most employers, they probably have some type of TPA or administrator administrative those products for them. They may have like automatic, like automatic claims fee that goes from your medical carrier to the FSA administrator, a tray administrator and they administer the claim. So it kind of takes out the paperwork out of your hands, you may have a debit card, so just something to be aware of when you’re going through your benefit offerings, with the products that are being offered, but to know that you can pair it with that. Now, Greg, you said you can’t pair an FSA with a qualified High Deductible Health Plan and an HSA which is true but if your your employer will probably offer you a limited purpose, FSA, which you can use for certain expenses like vision and dental, you can use it for qualified medical expenses, but you can use it for business at all. So there’s a lot of options out there. A lot of nuances and I think that’s probably why some people tend to shy away particularly have several options. Sounds like an ATM, which feels like the safe bet, right? versus a PPO versus a qualified high deductible.

Suburban Folk 49:07
That may be even one of the themes as we’re going through these scenarios that similar to investing if you can’t go to sleep at night without worrying about some of these scenarios, versus an HMO, that is something to be considered versus the dollars and cents. So we recognize that as far as People’s Choice, what their risk tolerance is, but, you know, if you do have a little higher risk tolerance, and you’re willing to do this math, that, you know, you probably find that there are some good solutions with these particular plans. And, you know, rather than having to sort of go with the traditional HMO, which definitely has the higher premiums and so on. So, one other thing before we leave the FSA as well, it’s it’s a different type of FSA. But as is the dependent care FSA I think there’s also even like a parking FSA I’ve read about, and I think one time I’ve had that offered by an employer. It’s a low amount. But if you find yourself where your job requires a certain amount for to pay for parking, if you work in like a downtown area, there’s actually available flexible spending account for that. And for the dependent care one, again, it does depend on your tax situation, if the credits that you would get for your number of dependents may equal out more, but I have found that especially if you have kids in daycare, it’s a $5,000 backs limit which anybody that you know, is paying for some sort of child care knows you’re going to hit that for a kid in the year. It’s something to look at. Definitely to, to be used. And then one other tip as well for those that have small children. diapers are not covered as part of a standard FSA. But overnight diapers actually are or overnight underwear, I guess you would call it officially. So when you get your kids passed straight potty training, but you know, maybe there’s still, you know, wetting the bed or having issues overnight, those are actually covered. So, something else to keep in mind. As far as the types of products that you can get and have reimburse, we’ve found that to be a useful one for using our Flexible Spending Account,

Unknown Speaker 51:35
I would say on the dependable, dependable but dependent care FSA. So you’re right, the minimum you can contribute is to 60 the max is 5000. I believe the childcare credit on your income taxes 6000. But if you are funding the maximum when you’re dependent care FSA, the way you save again because that’s comes out of your You know, it’s pre tax, right? So you’re not paying taxes on it, what you save in the potential tax savings may actually be more than the $6,000 tax credit. So again, it’s, it’s doing the math, it does require, again, it’s kind of that consumer driven products. Again, you’re you’re trying, you’re taking responsibility and accountability for taking on more of the risk and financial exposure for healthcare. And, you know, so it’s this, you know, and I think that’s why people shy away from it. It’s almost too daunting or overwhelming to think about, so they don’t do it involved. But I think if you think about it, and try it, and if you even if you contribute at least the minimum or a little bit over and play with it, I think you can become more comfortable with your choices. Yeah. I find out for myself. I don’t have an FSA. I never have a single person relatively healthy, so I didn’t find that I needed it and and for many years, I had a PPO with The nature a and that certainly the HRA was more than sufficient to cover my out of pocket. And then just a couple other things on the dependent care FSA, so it’s for dependence under 13. But also you can be used for our care. So if you have a disabled adult dependence, it will pay for daycare there are and also elder care. So there’s some definitely I would do the homework. So if you’re in situation again, if you have dependents under 13 or handicaps, adult dependence, or elder care, have a look into so a good opportunity to save some money. Pre tax.

Suburban Folk 53:47
Yeah, that’s a good one. Obviously, I’ve not had to deal with that. I haven’t done the research never that is an excellent point. Moving on to the HSA, which is the final one that we have on our list. How savings account. High Level like we mentioned, you have to have a qualified high deductible plan to even be eligible for one of these and that is based on an employer offering if they don’t employ, they don’t offer that qualified plan then you wouldn’t have an HSA available to you. When they do offer it, there can be combinations of an amount of money that they would actually fund into your HSA and then you have the ability to fund additional money into the HSA as well. This is the one product that does not have that use it or lose it consideration that we’ve been talking about. So even if you leave your employer or the end of the plan year, that money is still yours in that account. And I believe I don’t have this special in front of me Scott on a few would want you hit a certain threshold you can even invest that money is my understanding into others. things other than just sort of a, it’s essentially like a bank account. So there definitely are options. Well, let me stop there. Do you know what that threshold is? Or what the investment considerations look like? The first of all HSA is my

Unknown Speaker 55:13
favorite of the products. And I have an HSA myself, and I love it. I’ll tell you why here in a minute. But to answer your question, Greg, it typically is the HSA administrator. But typically, the threshold is once you have $1,000, in your HSA account, anything over that as you accumulate over that you can start to invest, and it’s very similar to a 401k. There’s different investment options that you can pick. And so to help grow your savings account,

Suburban Folk 55:39
okay, all right. That’s a nice round number to remember. And I’ve thought that that was around what I was thinking, but I didn’t want to say for sure, but is unique to the HSA in particular. And another thing around the investment part is this is the only savings to Cool that is pre tax in and I’m assuming that you are using it for qualified purchases is also not taxed when it comes back out. So nearly every other investment tool that we talked about 401k, like you mentioned, is pre tax going in, but whenever you start to take that money out at retirement, it will be taxed at that time versus a Roth when you’re paying money or your tax to contribute, but then it comes out and is not taxed. This is one where you actually get that tax benefit on both and so as an investment tool, it is is unique in that way in a good way. So I would echo the sentiment that you mentioned that this is definitely the best product as far as just managing your money and what what costs may come up that are unpredictable. Yeah. So and also

Unknown Speaker 56:56
talking about it goes in tax free and it comes out tax. Free as long as you’re using it for a qualified medical expense, but also it goes in tax free, the interest you earn in your investment is also tax free. So if you at the end of the year you earned this as a $50 in interest that’s not that’s tax free. So it goes in tax free, it grows tax free, and it comes out tax free, as long as you’re using it for qualified medical expense. And then the icing on the cake is once you turn 65, you can take money out of your HSA for non qualified medical expense, no penalty. So it’s really a great vehicle for retirement savings so well. So again, depending on your financial situation. So again, let’s let me take a step back and talk about the annual limits for 2020. For individuals, you can contribute 30 $550 per year and for family at 7100. So Whatever you elect to put into your HSA, your employer will break that out over however number of pay periods you have a year and so take an even amount out. So this is the what I contribute 1200 dollars. So that’s going to be I thought I was doing the math easy. 26 pages so, but it comes out so and that that funding is only available once as it comes out of your paycheck. So it’s not it’s not available all up front like an FSA. And then some in most cases, I think, reg, you indicated when we started talking about the HSA, most employers will entice employees to sign up for it by contributing a nominal amount I know for by employer in 2020. They’re going to fund $500 for each employee who elects they say and interesting enough this for 2020 qualified high deductible with an HSA is are the only benefits being offered. There’s three different levels of deductibles and the maximum amount of pockets but that’s kind of how health insurance is evolving and it’s, again a various employer to employer but I know over the years, you know, the, the company I’ve been with for almost 20 years where when from you had an HMO or then you might have a show with a PPO and then an HMO, PPO and a qualified high deductible and now they’re really getting more away to the qualified high deductibles. But if your employer does offer a qualified high deductible with an HSA it’s really again know each your situation everyone’s situation is different. But if you’re relatively healthy, if you’re not to risk adverse it’s a it’s a great way to save money towards your healthcare expense. And then again, if depending on your your financial situation, like for myself, I don’t touch my money. I may just say I I pay out of pocket, because I’m using that as a long term retirement savings tool. Because again, the money’s going in tax free is earning interest. Tax Free. And again, up until I’m 65. If I really do have a need to withdraw money for a qualified medical expense that comes out tax free, and then when I get to 65, if I want to take money out, so I can do that. So great.

Suburban Folk 1:00:26
I think that covers a lot of the HSA considerations that don’t already overlap with what we’ve mentioned with the FSA and HRA as far as again, pre tax who’s contributing the funds. Again, with the emphasize it is a type of plan that your employer needs to offer, but if they do, see if it makes sense for your investment plan to take advantage of it and just your family’s health situation for sure. As far as users are concerned, and we Hit a lot of these, especially around the FSA. Are there any that come to mind that we did not mention other uses that people may not necessarily think of for using their spending accounts on?

Unknown Speaker 1:01:11
I think we hit the part of the salient points. And one last thing I’ll say about the HSA, it’s portable. So once the money goes into the account is yours. So if your employer’s contributing money to your HSA, and you leave the employer halfway through the year, and they’ve contributed $200, that’s your money once it goes into your HSA, it’s yours. So that’s another thing to think about. It’s portable once it’s it’s your savings account. But I think again, I think I think we covered all the salience you know, co pays deductibles, coinsurance prescriptions, other qualified medical, you know, reference the FSA store, you probably be surprised to go out there and see what’s reimbursable from nfsa. HSA?

Suburban Folk 1:01:54
Yeah, yeah, for sure. I definitely would, again, recommend that as a resource play. To start, if nothing else, even before you, again, go to a target or a Walmart and like you said, when you buy the those things, you’ll see an indicator on your receipt that will show you whether or not or be a good indicator that whether or not it would be reimbursed or not. But but it’s definitely great place to start online. So I think what we are saying is, do your research for the products that you have available for this year’s open enrollment, do the math as we tried to do with some varying levels of success here. And then of course, make sure that it fits for your health care, healthcare risk tolerance, and then again, for your own budget. Do you think that sums it up pretty well as far as what people should be looking at as they enter this year’s open enrollment?

Unknown Speaker 1:02:48
Yes. And the other thing I would look at, particularly if you’re poor is offering more than one qualified high deductible with different deductible levels, really look at the difference between the freemium, I’ll just give my example. So my employer was offering three qualified high deductible health plans with, I think it was like a 1400 2800 and a 1300 dollar deductible. And I went with the highest deductible because the difference between the premium if I’m, you know, if I, again, it’s kind of my risk tolerance, if I don’t incur any expenses, I save a lot of money, my premium, but if I have to, if I have a lot of expenses, and I meet my full deductible, I’m only really paying maybe $50 more between my premium and my deductible that if I took the lowest deductible at a higher premium, so I think that’s a lot of the things that people don’t really look at is the difference between the cost of the premium for the different benefit plans. So when you’re doing your math, that’s I think, a really important to look at that as well.

Suburban Folk 1:03:51
Yeah, I would echo that exact sentiment as well. So that we know we put a lot of information out here for folks. So if anybody is listening And they do happen have questions, feel free to reach out through the website at Suburban folk.com or on Twitter. The handle is at Suburban Folk, my email is Greg at Suburban Folk, we’d be happy to put down in, in writing some of the terms that we’ve talked about here point you to some other resources online as well so that you know, folks have things in front of them so they can understand the options that they have. So, Scott, I really appreciate you taking time. Any last thoughts before we sign off,

Unknown Speaker 1:04:35
you know, health insurances, you know, it’s, it’s emotional, it’s, it’s scary. It’s a lot to traverse. But I think that the more informed with anything, the more informed you are, and making good decisions on your coverage and, and using your resources available. I think probably most importantly, they have really good resources, take advantage of those and there’s just a lot of information out on the internet. So you Get a lot of good information just by plugging in HR a FSA or HSA. So there’s a lot of information there to help you make those decisions.

Suburban Folk 1:05:06
And I will be sure to provide some of those resources those links on the website when this show gets posted. Scott, appreciate your time, and I will talk to you later. Take care. If you enjoyed this episode, please be sure to give us a rating on Apple, Spotify, Stitcher, or wherever you get podcasts. If you’d like to be notified of future weekly shows, please hit the subscribe button. Thank you. Suburban Folk is part of the pod all the time Podcast Network with six other great podcasts. They include the creative intuitive, another digital citizen, random unnamed podcast, the coffin podcast, big IQ podcast, and real aka truth. If you check us out on Twitter, you can see links to their direct pages to see what they’re up to.

This recording is for informational purposes only and should not be considered benefit or investment advice. opinions expressed our as of the date of the recording. Such opinions are subject to change. Their participants on this podcast are not responsible for any damages or other losses resulting from or related to the information or opinions discussed or their use. individuals should consider if a benefit or investment is suitable for them by referencing their own financial situation with their family and financial professional before executing any decisions.

Transcribed by https://otter.ai