Within the U.S., medical insurance premiums are tax deductible–if paid by out of pocket bills–however out-of-pocket bills usually are not. Nevertheless, there are exceptions to this rule. These embody two often-used tax-favored accounts:
- Versatile financial savings accounts (FSA). These accounts permit workers to put aside a portion of their pretax earnings to cowl certified medical bills; nevertheless, if the worker doesn’t use these funds by the top of the yr, they’re forfeited.
- Well being financial savings accounts (HSA). HSAs additionally permit workers to avoid wasting pretax earnings to cowl certified medical bills, however–in contrast to FSAs–HSA balances roll over from yr to yr. Whereas anybody with a certified plan can enroll in an FSA, solely workers who enroll in a high-deductible well being plan (HDHP) are allowed to contribute to an HSA.
How does having an FSA or HSA impression well being care expenditures. A paper by Ding and Glied (2024) use information on well being care expenditures for working age adults from the 2011-2019 Medical Expenditure Panel Survey (MEPS) to search out the reply. Their examine discovered that:
…households with FSAs spent a imply of 20% or $2033 (95% CI, $789-$3276) extra on well being care yearly than non–account holding households, largely resulting from elevated insurer-paid bills. Households with HSAs spent a imply of 44% or $697 (95% CI, $521-$873) extra on out-of-pocket expenditures and had insignificantly larger insurance-paid expenditures than households with out accounts, leading to general expenditures akin to these of non–account holders. The extra tax expenditures related to FSAs had been a imply of $1306 (95% CI, $536-$2076) yearly per household.
You may learn the complete paper right here.
