If you know in advance what your health expenses will be for the year--for example, if your children need braces in 2020, if you take a medication for a preexisting condition, or if you or someone in your family receives constant medical care--you can open a flexible spending account (FSA) to save money.
This special account must be set up with your employer, because you can only open one if you get health insurance through your job. In summary, it allows you to set aside money from your pay stub for certain health expenses that are usually paid out-of-pocket. 
The main benefit is that you will not have to pay taxes on this money. This means that you will save an amount equivalent to the taxes you would have paid on the amount you set aside.
The total amount in your flexible spending account will be set by your employer, and will be debited from your pay stubs throughout the year. The Affordable Care Act (ACA), also known as Obamacare, establishes the maximum amount that you can contribute to this type of account each year, which is $2,650 (though this amount may change each year depending on inflation.)
Should you need all of the year’s money for a specific medical expense, another benefit of a flexible spending account is that the total will be available to you even if you’ve only made the first contribution. Of course, you will continue to make monthly payments until you reach the annual agreed amount.
Some examples of what you can use the money you set aside in this account for are:
- Deductibles
- Out-of-pocket costs and copays
- Treatments not typically covered by health, dental or vision insurance plans; e.g., LASIK eye surgery, braces (dental appliances), or special contact lenses
- Certain prescription drugs
- Blood sugar monitors
- Gym programs and vitamins, only if prescribed by your doctor as part of a medical treatment
To use this account, it’s important to know what medical expenses you will have before the start of the year: if the money you set aside is not spent in those twelve months, you run the risk of losing it.
But there are exceptions, which depend on the flexibility of your employer: some offer a two-and-a-half-month grace period so that, for example, you can use your 2020 flexible spending account money up until March 15, 2021. Others allow you to transfer up to $500 to the next year.
As a reminder, you can only set up this type of account if you have insurance through your employer. You can’t have one if you bought health insurance for yourself on the Obamacare Marketplace. If you did, you have another option called a Health Savings Account (HSA) which you can set up as an individual.
Sources: healthcare.gov, healthinsurance.org
