Monday Morning Morning Miles Talk is a regular series I am starting that has some smaller, more quirky ideas to kick off the work week. These are essentially random ideas that I wanted to share with you. I hope you enjoy the series.
How To Maximize Your Flexible Spending Account
The first topic I would like to talk about in the Monday Morning QB series is how to maximize your flexible spending account (FSA) using ideas learned from travel hacking. This will not be a “big win” type of deal but it will be something that you can do long term to help reduce your medical costs.
First Off – What Is A Flexible Spending Account?
A flexible spending account is a program where you set aside money for healthcare costs. The money is taken out of your payroll check pre-tax. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside. Example: if you put $1000 into your account, and you are in the 15% tax bracket, you would save $150 dollars in taxes.
The money set aside must be used by the end of your employers health plan year (usually coincides with the calendar year). Any money unused at the end of the health plan year is forfeited. Make sure not to overestimate your expenses when filling out your FSA paperwork.
What Is Eligible For Flexible Spending Account Reimbursement?
According to Healthcare.gov you can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you’re married, and your dependents.
- You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.
- You can spend FSA funds on prescription medications, as well as over-the-counter medicines with a doctor’s prescription. Reimbursements for insulin are allowed without a prescription.
- FSAs may also be used to cover costs of medical equipment like crutches, supplies like bandages, and diagnostic devices like blood sugar test kits.
How I Use Travel Hacking Skills To Get A Discount On My Prescriptions
I would imagine most people use their flexible spending account on big expenses like doctor visits and surgeries etc. The other big expense people use their FSA for is prescriptions. That is one of the expenses I want to focus on.
I purchase CVS gift cards off of eBay at a 10% discount. They are on sale at regular intervals from SVM. I usually purchase them with whatever card I am trying to meet minimum spend on but anything that earns 2% or above will work. This deal used to be even better when you could get 10x eBay bucks and portal payouts on gift card purchases. Unfortunately, eBay stopped paying out on both a while back.
I then use the discounted gift card at CVS to pay for my prescriptions. When you turn your prescription reciepts in for reimbursement you get reimbursed for the full amount – including the 10% discount from using the gift card. For every $100 in prescriptions that you fill you pocket $10 in tax free cash from your FSA account!
What Other Items Work
What if you don’t have a standing prescription, what else could you use this method for?FSAstore.com has a list of eligible products, where a prescription is not neccesary, that are FSA eligible. Some of the products included on this list are contact lens solution, lip balm, sunscreen, prenatal vitamins, condoms, first aid kits etc. you can see the whole list HERE.
This means you can stock up on these items using your discounted CVS gift card but still get reimbursed for the full amount. Tax free money gets put into your pocket!
Other Places This Method Would Work
Lets say you don’t have a CVS near you or the item you need is overpriced at CVS. You can use this theory anywhere you are able to purchase a discounted gift card.
Target is an option when you use Amex offers to purchase discounted Target gift cards from 3rd party stores (like Lowe’s, Staples, Office Depot etc.). SVM also sells Meijer gift cards at a discount on eBay. Rite Aid has been a part of Amex Offers in the past where you could load up on gift cards for future purchases.
It is also possible to get discounted gift cards for the 3 major pharmacies from CardCash. CVS, Walgreens, and Rite Aid are currently on sale ranging from 7-12% off. You can use your Ink Cash or Ink Preferred to get 5x UR points when purchasing from CardCash as well. Remember to check out using PayPal to get the 5x earning. These are second hand gift cards which come with some risks and they only have a 45 day guarantee. The gift cards from SVM off of eBay are first hand cards and come with less risk. This is a good option if you fill your prescriptions at Walgreens or Rite Aid.
Another option is to purchase these items from your local grocery store using a card that gets a high return at grocery stores. Something like the American Express Blue Cash Preferred card (6% return on grocery).
As you can see there are different options available to you. CVS just happens to be the route I use since their gift cards are regularly discounted and easily available.
Conclusion
I hope this gave you some ideas on how to maximize your flexible spending account. Being able to pay medical costs with tax free money is a great perk of the FSA program but getting an extra 10% off on top of that makes it even better!
This adds an extra step to the process but it is what people in the hobby like to call “pajama points” since you are able to do the extra step while at home in your PJ’s.
And for those of you that decided to read the whole article here is an extra little nugget for you. CVS has very competitively priced beer (when on sale), wine, and spirits. CVS gift cards do not exclude the purchase of these items in their terms. The occasional CVS employee will say you can’t use the gift card on alcohol (I have had one in 4 years) but they are wrong. You can also use CVS gift cards to purchase stamps at a discount.
Let us know of any unique ways you have used your travel hacking skills to help with your everyday life/purchases!
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[…] You can use the discounted gift cards to pay for your prescriptions. When you turn in your reimbursement receipts, you’ll be reimbursed the full amount, including the 10% discount from using the gift card. Think of it this way, for every $100 in prescriptions you fill, you get $10 tax-free dollars from your FSA account! Find more ideas on using gift cards for prescription discounts here. […]
[…] to get the most back for your buck. For more general info and other awesome ideas, check out Mark’s post on the topic earlier this year. Also, just because a store is on the list doesn’t necessarily […]
Regarding the FSA…that’s a great idea until you get audited by the IRS…they frown upon pre-tax dollars being spent for non deductible items. So the extra cash you’re being reimbursed that wasn’t used should’ve been taxed – they’ll ding you if you’re personally audited. This is assuming I understand what you said…you’re requesting reimbursement for the full amount of the prescription, not what you actually paid? Your FSA administrator can actually get into a bad situation and it can cause the entire company sponsored FSA plan to become non-compliant and shut down. No bueno! 🙁
I don’t think you are quite understanding what I am saying. You are paying full price for the items. The receipt will be for the full price. CVS gets paid the full amount that you claim. You are just using a gift card you bought at a discount to make the purchase. I don’t think it would be any different then using a gift card you received as a gift to purchase FSA redeemable items.
I am no tax professional but if your receipt matches what you claimed with FSA I don’t think there is anything they can do.
Ah ha – I see what you’re saying! Very clever! Yes, if the dollars spent matches what you claim from your FSA, your’e all good! These sentences just threw me off I guess: “When you turn your prescription reciepts in for reimbursement you get reimbursed for the full amount – including the 10% discount from using the gift card…This means you can stock up on these items using your discounted CVS gift card but still get reimbursed for the full amount.”
No problem — thanks for reading!
Very informative!!
Excellant & I read article to the end & picked up that extra pearl
Haha Awesome John – thanks for reading!
“This is the only way, that I know of, to get alcohol at a discount since they are price regulated by the government.”
What state?
Sorry that is for Michigan – I have removed it to be more general since that is not the case in most states.