Health Care Flexible Spending Accounts – Use It or Lose It

While everyone else is rushing around purchasing Christmas gifts, I’m frantically working to get my Health Care Flexible Spending Account (HCFSA) in order.

For those of you unfamiliar with Health Care Flexible Spending Accounts, a HCFSA allows the participant to purchase qualifying health items and health services with pre-tax dollars. Sometimes these accounts are called Health Savings Accounts (HSA). Usually participation is through an employer.

During the open enrollment period, the participant decides the amount of money to contribute to the HCFSA by estimating how much they and their dependents will spend on qualifying health items and services for the coming year. There is a minimum and maximum contribution amount so check with your HCFSA administrator for those numbers as they may change every year.

(As of 2011, over-the-counter (OTC) medicines are no longer eligible for reimbursement UNLESS the participant has a physician’s prescription.) Once the enrollment period for the HCFSA ends, the participant cannot make changes to the contribution amount unless there is a qualifying life event such as a change in marital status, new birth/adoption of a child, death of a dependent, change of employment and a few other events.

Every pay period, an amount of pre-tax money is automatically withheld from the participant’s paycheck to fund the HCFSA. Each company has their own administrator that manages the HCFSAs. Some administrators provide their participants with debit cards that deduct from the HCFSAs when used on health purchases.

Other administrators require their participants to purchase the qualifying health items or services first and then submit the receipts for reimbursement by mail, fax or electronically. At the end of the year, any amount of money in the account that has not been used is forfeited by the participant. Participants have until mid-March of the following year to submit their claims for reimbursement.

SO I’m frantically trying to spend the rest of our HCFSA money by year-end before I lose it. Long story short – we were able to increase our HCFSA contribution because of the birth of our son, but our health insurances covered more of the bill than we thought they would so we’re left with a large chunk of money that needs to be SPENT SOON.

Here are some tips for making the most of your HCFSA because IF YOU DON’T USE IT, YOU LOSE IT! If your HCFSA provides you with a FSA debit card, then they’ve saved you the hassle of copying and submitting receipts. For those of you who have to submit your claims manually, you may find the information below helpful.

Know the numbers.

Know your contribution amount, how much you have been reimbursed, and how much you have left to spend (disbursable balance). For those of you who have been requesting reimbursements throughout the year, you probably have a good idea of how close you are to getting your full contribution back. For those of you who haven’t been submitting your expenses, now is the time to get familiar with your account. Contact your flexible spending administrator ASAP and ask them how much you have left to spend.

Find your receipts and calculate what you’ve spent.

Compile all the health receipts that you haven’t submitted to the administrator. Your administrator can provide you with a guideline for what is reimbursable. Add up the receipt totals and then subtract that from your disbursable balance for this year and you will get the amount you still need to spend. Remember that if you purchased non-health items with your health items, you’ll need to do some math in order to find out how much you will be reimbursed. (Sales tax on qualifying health items can also be reimbursed.) Most stores will indicate the qualifying health items with a letter or symbol next to the item number. For example, Walmart uses a “H”; Walgreens and Costco use a “F”; and Target uses a “+” and also lists the health item total on the bottom of their receipt.

Make a list to keep organized. 

Most administrators require you to send in a claim form with the copies of your receipts. All claim forms must include the date(s) of service, the provider name, claimant name (you or your dependent) and the amount being requested for reimbursement.

Submit the claim form and copies of the receipts for reimbursement. 

If your HCFSA administrator has a quick turnaround (before the end of the year), submit the receipts for reimbursement ASAP. Although you may be tempted to wait until March, it’s a good idea to get your reimbursement earlier. Why? Because some items that you think qualify for flexible spending may not really qualify. I purchased Vaseline from Target and Children Saline Drops from Walmart. My receipts indicated that they are qualifying health items, however those claims were rejected by my administrator.

Shop!

Once you know how much you need to spend, shop! It is better to overspend (on items you need) by a little than to forfeit your flexible spending contribution. Simple math. Let’s say you are in the 25% income tax bracket. For every flexible spending dollar spent on qualifying items and services, you save 25 cents. For every dollar forfeited by not spending it, you lose 75 cents.

Shop online!

There are so many websites that make shopping for qualifying health items easy. Websites like FSAstore.com, drugstore.com and walgreens.com take the guess work out of HCFSA shopping by displaying a “FSA” symbol next to the qualifying health item. Unless you have an over-the-counter prescription from your physician, stay away from “FSArx” items because you won’t be reimbursed without the prescription. You may pay more on these online stores, but if you have the time, comparison shop onamazon.com. I filled up my check-out basket from one of these online stores with qualifying health items and then I searched amazon.com for those same items. I ended up purchasing from Amazon because it was less expensive. You may be tempted to procrastinate and shop online on New Year’s Eve but this is not a good idea since most online stores do not charge your credit card until your order is shipped. Play it safe and shop earlier.

Ideas for what to buy:

• If you have a lot to spend, make a trip to see an optometrist to update your prescription and get a new pair of glasses or contact lenses.
• Buy items you need for the home: First-aid kits and supplies, bandages, gauze, medical tape, hand sanitizers (like Purell, Germ-X and Nexcare), bath tub rails or grips
• Buy items for personal use: heart monitors, blood pressure monitors, hearing aids, incontinence supplies, anti-arthritics (glucosamine or chondroitin), flu shots, nasal strips, neti pots, sunscreens (must be SPF 30 or higher but not cosmetic products and lotions that contain SPF)
• Buy family planning and baby items: condoms, birth control pills, Viagra, pregnancy tests, ovulation kits, birthing classes, Lamaze classes, breast pumps and lactation supplies, diaper rash cream