Ah, week 3 of the Frost family and SCHIP! In case you need a refresher course, see my posts here, here, here, here, and here
No one on the right is picking on the 12 year old. The parents have been raked over the coals for “Daddy Frost, the SUV…

You might have only gotten to the end of September with money in the account, but you used the money to pay your deductibles and copays that would’ve come out of your after tax dollars otherwise. It saves you money all the way around.

1: figure out exactly how much you actually use your insurance. I hardly ever go to the doctor so my medical expenses are pretty low and limited to dental and optical care. Why would it make sense for me to buy a policy with a $250 deductible?

2: Find out how much the difference between your current deductible and a $2000 deductible policy would cost. If you have a $250 deductible policy, the difference is probably close to $3000. Those premiums are not money that you can use for anything if you don’t exceed your deductible and you’re still going to have to pay your deductible. There is a better way. Under federal law, you can set up what is called a Medical Flexible spending account out of pretax dollars and have it withheld from your pay the same as if you were paying premiums. As long as you use it for medical related expenses by the end of December, that money remains yours tax free. If you fail to use it, it goes to the government.

Let me explain the beauty of this plan.

If your current premium is $1000/ month with a $250 deductible, but it would be only $700/month with a $2000 deductible and an accident rider (Accident riders are REALLY CHEAP and cover your deductible and copay in case of an accident), you would save $300/month. If you place $200 of that $300 in a flexible spending account, you will have $2400 to pay towards your deductible, or enough to pay your deductible while still saving $1200/ year in premiums. IF you don’t use it all, whatever you have left you can use for any medical related expense during the month of December. Want to join a health club? Do it in December and submit the receipt for reimbursement. Need a new crown or a root canal? Submit the receipt for reimbursement. Want Lasik surgery your insurance doesn’t cover? Submit the receipt for reimbursement. As long as the expense is reasonably health related, the insurance company has to reimburse you because its YOUR MONEY! Some doctors will even handle submitting the Flexible spending account forms themselves so you won’t even have to pay up front. There are also flexible spending accounts available for child care and elder care. Flexible spending accounts allow people to set aside before tax dollars for expenses that would otherwise be deductible.