Texas Health
Insurance
Options
Healthcare
Reimbursement Account (HRA)
Perhaps you have health care bills that
aren't completely covered by the medical,
hearing, dental, and vision plans, such as
deductibles, co-payments, or special
services. If so, health care reimbursement
account can help. Under current federal
law, you can pay for your out-of-pocket
health care and dependent care expenses
with tax-free dollars. This means you
pay less in taxes each year.
The health care reimbursement account
works like a personal checking account.
Each plan year, you decide how much you
want to contribute to your personal
account, up to the limits. You can have a
certain amount deducted each month from
your pay and put it into the health care
reimbursement accounts. During the plan
year, as you have eligible health care
expenses, you file claims and are
reimbursed with the tax-free dollars in
your account.
It's very important
to calculate your annual deposit
carefully. The
IRS requires money left in your accounts
at the end of the plan year (June 30, 2002) to be forfeited. Because of this "use it or lose it" rule, it's
important that you anticipate your
expenses when deciding on your account
contributions. You may request
reimbursement for expenses incurred during
the plan year for up to 60 days after
June 30, 2002. All forfeited money belongs to ASEA/AFSCME Local 52
Health Benefits Trust.
Contributions to your health care
reimbursement account are made from your
pay before taxes are withheld. This means
your taxable income is reduced. As a
result, the amount of federal income tax
you pay is also reduced.
Assume
your income is $45,000 a year and you have
$2,000 of eligible health care expenses
during the year. Here's what participation
in the health care spending account can
mean to your net pay:
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WITH PARTICIPATION
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WITHOUT PARTICIPATION
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Annual
Income |
$45,000
|
$45,000
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Contribution to Account |
$2,000
|
$0
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Taxable Income |
$43,000
|
$45,000
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Estimated Taxes* |
$9,890
|
$10,350
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After-tax Expenses |
$0
|
$2,000
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Net
Pay (after health care expenses) |
$33,110
|
$32,650
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Savings |
$460
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$0
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*Assuming federal and Medicare taxes
of 23%
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In this example, by participating in the spending
account, your net pay for the year after
health care expenses are deducted is $460
more because you pay less in taxes.
IRS regulations allow a variety of
specific expenses to be paid back to you
from your health care spending account.
Below is a partial list of these eligible
expenses. To be eligible, all items must
be prescribed and/or performed by a
licensed provider, and some must be
prescribed and/or provided by a physician.
To protect the plan's tax-qualified
status, the Administrator will make the
final determination on eligibility of an
expense and/or provider requirements.
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REIMBURSABLE HEALTH CARE EXPENSES
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Acupuncture - performed by a licensed practitioner
Ambulance
Analysis - psychotherapy by a
licensed practitioner when medically
necessary
Birth Control
Car Controls - special controls for
the handicapped
Chemical Dependency
- at a treatment center
Chiropractors - for services within
scope of license
Contact Lenses
- including contact lens solutions
Crutches - purchase or rental
Deductibles and Coinsurance - not paid
by the plan
Dental Fees -
x-rays, fillings, braces, extractions,
false teeth, treatments, etc.
Drugs
and Medicines - prescriptions,
including those for smoking cessation
(over-the-counter drugs are NOT eligible)
Eyeglasses - lenses, frames, exams
Founder's Fee - monthly or lump sum
fee to a retirement home (covers portion
specifically for medical care)
Guide
Dog - purchase for blind or deaf
Halfway House - care to help
individual adjust from life in a mental
hospital to community living
Health
Care Equipment - excluding general use
furniture, household items, or appliances
Hearing Aids and Hearing Exams
Hospitalization - including private
room charge
Laboratory Fees
Laetrile - if legally qualified as
a drug where purchased
Learning
Disability - tutoring by licensed
school or therapist
Lifetime Care
- advance payment to private institution
for lifetime care, treatment, or training
of mentally or physically handicapped
patient
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Medical Information Plan
- fees for maintaining medical information
on computer
Medicines -
Prescribed and legally obtained drugs and
medicines (excludes over-the-counter
drugs, even with a prescription)
Nursing Home - confinement for
illness/injury
Nursing Service -
by registered nurse or licensed practical
nurse for medical care
Optometrist
- for services within scope of license
Orthodontia
Oxygen
Physicals
Physical Therapy
Psychologist - for services within
scope of license
Radial Keratotomy
Special Schooling - to relieve
handicap
Sterilization
Surgery - Including experimental
Syringes, Needles, and Injections
Telephone - Special for deaf
Television - Audio display equipment
for the deaf
Therapy - Physical,
occupational, or speech therapy by a
licensed therapist
Transplants
Vitamins and Mineral Supplements -
prescribed for treatment of illness
Well-Baby Care
Wheelchairs
Vaccinations and Immunizations
X-ray Fees
NOTE: cosmetic surgery or procedures (such
as tooth bleaching) and insurance premiums
are not eligible expenses. |
Here are some things to think about as
you decide how much to contribute to your
health care spending account:
-
Expenses you may have that are not
covered by the health plans but are
reimbursable from this account
-
How much your deductibles are expected
to be for the plan year
-
An estimate of the total out-of-pocket
maximum you could pay
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What your coinsurance and co-payments
will be
-
How much you paid for health care
costs during the last plan year.
When estimating your health care
expenses for the year, remember that our
plan year runs from July 1 through June
30. Carefully estimate the eligible
expenses you will accrue for that period,
including deductibles, coinsurance,
co-payments, and other out-of-pocket
amounts as well as uncovered services.
Contributions must be at least $20 a
month. You can contribute up to $5,000
each plan year to a health care spending
account. For example, if your
out-of-pocket health care costs were $500
during the last plan year, and you expect
similar out-of-pocket expenses this year,
you may want to set aside $40 a month for
the health care spending account.
If you use the health care spending
account to pay for eligible expenses, you
cannot take a tax deduction on your income
tax for the same expenses. (You're
currently allowed a deduction on your tax
return for expenses that total more than
7.5% of your adjusted gross income.) You
must choose which is more advantageous to
you; your tax adviser can help.
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