We’ve known our daughter would need braces for several years. After consulting with an orthodontist, and with the recent loss of her last baby tooth, it’s now time to get serious about getting her teeth straightened out.
With the 2015 health insurance enrollment period coming up soon, we have some options that may be able to make her orthodontic treatment a little easier on the checkbook.
We researched the pros and cons of health savings accounts (HSAs) and flexible savings accounts (FSAs), and here’s what we discovered:
Option 1: Health Savings Account (HSA)
With an HSA, we would contribute a specified amount out of each paycheck pre-tax. Additionally, my employer would contribute $250 semi-annually to the account, for a total of $500 per calendar year. I could then use the funds for my daughter’s orthodontic treatment, without being taxed upon withdrawal.
The other interesting thing about an HSA is that it can be used as an investment opportunity. If the money is withdrawn for non-medical approved uses before the age of 65, it is taxed along with a 20% penalty — but if the funds are withdrawn after age 65, you simply pay income taxes.
Option 2: Flexible Savings Account (FSA)
As with the HSA, a set pre-tax contribution would be deducted from each paycheck. The FSA doesn’t have the benefit of employer contributions, but it is front-loaded, meaning the expected amount of my entire year’s contribution would be available on January 1st.
For example, if I specified that $200 should be deducted from each bi-monthly paycheck, the entire $4,800 I’d anticipate contributing during 2015 would be available for my daughter’s orthodontic treatment on January 1st.
One additional caveat of the HSA is that I only qualify to utilize it if I enroll in a high-deductible medical insurance plan. The details of the high-deductible plan don’t meet my family’s health care needs, so I’ve chosen a traditional health care plan, along with an FSA.
The FSA option is really the better choice, given our goal of starting my daughter’s orthodontic treatment as soon as possible. This allows us to walk into the orthodontist’s office in early January and pay her bill in full. Though we will actually be paying for it throughout 2015, we won’t incur any interest charges — and our payments will be made pre-tax.
Have you ever used an HSA or FSA to pay for a planned medical treatment? Which one did you choose and why?