Flexible Spending Account = Awesome

I know a lot of people know what a Flexible Spending Account is, but for those who don't, here is a brief rundown. You can allocate a set amount of money (up to $2000) to come out pre-tax to be used for qualified medical expenses. The glorious part of this is that you can use all of the money all at once because it is coming out of your regular paycheck for the entire year.

Some of the downsides of the FSA is that if you don't use it, you lose it. Also, they have been implemented in various ways -- most involving manually sending in receipts to your insurance provider to be processed as a claim.

In a previous post, I talked briefly how Aetna handles their FSA claims. Basically, you don't have to do anything to get a claim processed. If a provider sends in a bill, they look to see if you paid a copay. If you did, they check your account to see if you have funds available, and if you do, automatically send a check to you. This gets even better when you get a perscription filled. The pharmacy AUTOMATICALLY GETS PAID at the point of sale. This means that if you have funds available, you don't pay ANYTHING to pick up your scripts. This, is absolutely awesome :).

To top it off, Aetna has probably the tightest integration between their business systems and online presence that I have ever seen in an insurance company. EOBs notifications are sent via email at the time of processing and are availble the same day in your online account. Similarly, anything that is processed through your FSA generates the same kind of notifications and you can view your balance onlne in realtime.

How does this tie to getting out of debt? I'm glad you asked! :). Basically, if you know what your medical expenses are going to be (a year of having small children will let you know that pretty quickly), you can consider that a sunk cost -- a cost you are going to have regardless. By using the FSA, you can make that cost a dedcution, lowering your overall taxable income and thus paying "less" for the medical expenses incurred. It isn't a TON of money you'll save, but when you are fighting to climb out of the pit of debt, every little handhold helps :).