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The cost of health care is a significant concern for people across the U.S., particularly as many new medications approved to treat various illnesses come with a whopping list price. It’s no wonder that people turn to programs like health savings accounts as they plan for medical expenses.

A health savings account, usually referred to as HSA, is a program available to individuals with high deductible health plans, such as the one offered through American Fidelity, which uses pre-tax dollars to mitigate financial burdens that are related to health care spending. The funds set aside in an HSA can be used for a variety of expenses, including copays, prescription drug costs, hospital visits, as well as dental and vision needs. Not only can the funds in an HSA be used to pay for your needs, but also those of a spouse or tax dependents.

High-deductible health plans are typically selected by individuals who are in fairly good health and are not dealing with chronic medical issues that require frequent doctor visits or prescription medications. Those patients typically select a plan that has a low deductible since they use it more often.

If you have had an HSA, there are some changes coming to the plan in 2020. First off, there are new 2020 limits established for high-deductible health plans. According to the Internal Revenue Service (IRS), the maximum out of pocket expenses for self-coverage will increase from $7,900 to $8,150 in 2020. Deductible limits will increase from $15,800 to $16,300.

The minimum deductible will increase for high deductible plans HDHP as well. For self-only plans, the minimum deductible will rise from $1,350 to $1,400. Under family plans, the deductible will tick up from $2,700 to $2,800. As a result, there will be increases for annual contribution limits to an HSA plan in 2020. For individuals with an HDHP, the HSA contribution limit will increase from $3,500 in 2019 to $3,550 in 2020. For families covered by a high-deductible plan, the HSA limit increases to $7,100 from $7,000.

There are advantages in having an HSA. The funds invested are pre-tax, meaning they are taken from a paycheck before taxes are deducted, similar in the manner money set aside for a 401(k) contribution is done. When money is used for medical expenses, it can be withdrawn from the HSA account without any taxable penalties.

Funds set in an HSA can continue to grow over the life of a contributor. They are also portable, meaning an HSA is not affected by a job change. Funds in an HSA do not have to be used before a deadline, unlike those in a Flexible Savings Account, which is another health savings program available.

An FSA is a pre-tax funded account that can be used to pay for many medical needs, including dental and vision expenses. An FSA can also be used to pay for work-related childcare and other similar items. Claims for the FSA are submitted through an employer. Those claims require proof of medical expenses and a statement that it is not covered by the employee’s medical insurance program. Once that is done, the reimbursements will be sent.

While the FSA is also a health savings program, it is different than an HSA in several ways. Like the HSA, the FSA uses pre-tax dollars, but one is not required to have a high-deductible health plan to qualify. The most significant difference between the plans is the fact that unlike the HSA, the FSA does not roll over annually. It is a “use it or lose it” type of account. That requires some forethought when budgeting how much money to include in the FSA.

There are three types of FSAs, a health care FSA that allows one to use the pre-tax dollars on medical, dental and vision needs. There is also a Limited Expense HCSA for qualified out-of-pocket expenses. This kind of account is typically for those who have high-deductible plans. Then there is the Dependent Care FSA, which allows the funds to be spent on qualified dependent care expenses.

There are limits set by the IRS for an FSA. The IRS limits a $2,750 investment for individuals and $5,000 for a dependent care account.