Expert answers questions about health care spending accounts

November 17, 2021  //  FOUND IN: Updates & Resources

The phrase “spend money to save money” didn’t refer to Flexible Spending Accounts, but it could have. By using a health care FSA, employees can save money for health and medical expenses not covered by insurance.

U-M offers faculty and staff the opportunity to pay for eligible health care expenses with pre-tax dollars using a health care FSA, which allows employees to have a set amount taken from their pay before taxes, which lowers their income tax.

The money goes into an account that can be used for eligible expenses, such as medical and prescription drug co-pays and approved over-the-counter products.

Enrollment in U-M’s FSAs continues through Dec. 31. Visit hr.umich.edu/flexible-spending-accounts for more information.

Jeffrey Kullgren, associate professor of internal medicine, helped design a U-M poll that concluded most 50- to 80-year-old adults do not utilize tax-advantaged savings accounts. U-M employs more than 16,600 faculty and staff older than 50.

Although the poll examined utilization of all types of tax-advantage savings accounts, U-M’s benefits plan offers only FSAs.

Kullgren, a physician at Michigan Medicine and the VA Ann Arbor Healthcare System, explained why tax-advantage accounts are worth exploring.

How does a health care spending account save money?

Kullgren: There are different types of health care spending accounts, including Flexible Spending Accounts, Health Savings Accounts and Health Reimbursement Arrangements. While these accounts differ in their details, they all provide a tax-free way to pay for qualified medical expenses. For many people, these accounts not only help them pay less in taxes, but also ensure they are able to pay for future health care services.

Why aren’t adults older than 50 utilizing health care spending accounts?

Kullgren: In our survey, 40 percent of U.S. adults ages 50-80 told us they hadn’t saved for health care in the last year because they already had enough savings for care they might need. Less common reasons were not being able to afford saving (27 percent), not needing health care services (18 percent), and not having thought about saving for health care (13 percent). 

Are younger workers using health care spending accounts?

Kullgren: The National Poll on Healthy Aging collects data from U.S. adults ages 50-80. Therefore, we weren’t able to compare whether younger workers are using health care spending accounts differently than older workers. Our other research suggests that many individuals with high cost-sharing for their care, regardless of age, may be missing opportunities to save for health care expenses.

What should be considered before enrolling in a health care FSA?

Kullgren: Access to the different types of health care spending accounts can depend on where you get your health insurance and what type of health plan you have. It’s important to know which accounts you have access to and what health care you may need in the next year so you can make the best decision.

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