It’s no secret that healthcare costs can get out of hand quickly.

Amid rising medication prices, increased demand for doctor visits, and ongoing inflation, you wouldn’t be surprised to see your healthcare costs surge.

If you're looking for a way to manage these expenses more effectively in 2025, one of the best ways to do it is with a flexible spending account (FSA).

An FSA allows you to set aside pre-tax money for medical expenses, including prescriptions, over-the-counter medications, and other qualified expenses.

It’s just one way you can save on healthcare costs while getting the treatments you need.

But how does an FSA work, and how can you use it to save on medications at your pharmacy?

Read on to learn everything you need to know about FSAs, how they work, and how to make the most of them during your pharmacy visits.

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What is a Flexible Spending Account (FSA)?

A flexible spending account (FSA) is a tax-advantaged financial account that allows you to set aside pre-tax dollars for eligible medical expenses.

FSAs are typically offered by employers, allowing you to contribute a portion of your salary before taxes are deducted.

You can use FSA funds for a variety of healthcare expenses (listed below). The pre-tax contribution reduces your taxable income, which can save you money come tax season.

It’s important to note, though, that FSAs are generally use-it-or-lose-it accounts. If you don’t use the funds by the end of the year, you risk losing the remaining balance.

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What Does a Flexible Spending Account Cover?

The money you contribute to your FSA can be used to pay for a variety of healthcare costs, including:

• Doctor visits: FSAs cover copays, deductibles, and out-of-pocket expenses for everything from routine check-ups to specialist visits to urgent care appointments.
• Dental and vision care: FSAs can help pay for dental costs like cleanings, fillings, and braces. They can also cover eye exams, prescription glasses, contact lenses, and even LASIK surgery.
• Prescription medications: Any medications prescribed by your doctor, including antibiotics and chronic condition treatments like insulin or asthma inhalers, are eligible for FSA reimbursement.
• Over-the-counter medications (with a prescription): Pain relievers, allergy medications, cold and flu treatments, and other non-prescription drugs can be covered if you have a doctor’s prescription.
• Medical equipment: Supplies like blood pressure monitors, crutches, thermometers, first aid kits, and bandages can be purchased using FSA funds.

• Preventive care: Vaccinations, flu shots, and certain preventive screenings (like mammograms and cholesterol tests) are eligible FSA expenses.
• Mental health services: Therapy sessions, psychiatric care, and prescribed mental health medications can also be paid for with FSA funds.

However, FSAs don’t cover all healthcare expenses. Some common exclusions include:

• Cosmetic procedures: Any treatments or surgeries considered cosmetic, like Botox or teeth whitening, for example, are generally not covered by FSAs.
• Over-the-counter medications without a prescription: While some over-the-counter medications are covered, FSAs typically require a doctor’s prescription for items like pain relievers, cold medicines, or allergy medications.
• Health insurance premiums: FSAs also can’t be used to pay for health insurance premiums, whether medical, dental, or vision.
• Elective services: Treatments or services that are not medically necessary, like weight loss programs or fertility treatments (unless specified by a doctor), may not be covered.

To figure out the specifics of your FSA account and find out what’s covered in your plan, reach out to your employer.

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How Do I Use a Flexible Spending Account?

Once you’ve set up an FSA account, you can put it to use at a provider’s office, whether it be your doctor or your local pharmacy.

Here's a quick breakdown of how FSAs work in practice:

1. Contribute to your FSA: Your employer will allow you to set aside a portion of your salary into your FSA on a pre-tax basis. This reduces your taxable income for the year. Bonus: It could lead to tax savings.
2. Use your FSA funds: Once you have funds in your FSA, you can use them for any covered expense.
3. Submit expenses: For most purchases, you can swipe your FSA card like a debit card to pay for eligible items. If you need to submit a claim (if you paid out-of-pocket), you can do so by following the FSA provider's process.
4. Track your balance: Keep track of your FSA balance to ensure you’re using the funds before they expire at the end of the year.
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Pros and Cons of Flexible Spending Accounts

Trying to decide if an FSA is the right choice for you? Here are a few pros and cons to keep in mind:

Pros:

• Tax savings: Since FSA contributions are made with pre-tax dollars, you reduce your taxable income. In other words, you pay less in taxes.
• Budgeting help: Setting aside healthcare funds ahead of time gives you more predictable costs. In the process, you can budget for expenses more easily and efficiently.
• Wide range of coverage: FSAs cover a wide range of medical expenses, from prescriptions to medical equipment. This kind of coverage can give you added flexibility in how you use your funds.

Cons:

• Use-it-or-lose-it: FSAs typically have a use-it-or-lose-it policy, meaning any unused funds at the end of the year are lost. Some employers may offer a grace period or allow a small carryover, but you should be mindful of how much you contribute
• Limited eligibility for some items: Not all medical expenses qualify for FSA reimbursement, so it’s important to check with your FSA provider to confirm whether a specific item or service is eligible.
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How to Use Your Flexible Spending Account at the Pharmacy

You can use your FSA at your local pharmacy, just like you would at other healthcare providers.

Before you do, make sure you're aware of what's covered by your FSA.

Remember that funds can be used for prescription medications, certain over-the-counter medications (with a doctor's prescription), and other eligible medical supplies and services.

When you visit the pharmacy, tell your pharmacist that you plan to use your FSA. They can process the payment either by swiping your FSA card or submitting a claim to your FSA provider.

For ongoing prescriptions or regular over-the-counter medications, you can use your FSA card multiple times throughout the year.

Just be sure to keep track of your balance and use it before the end of the year to avoid losing any remaining funds.

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Is a Flexible Spending Account a Good Option for You?

Ultimately, deciding whether a flexible spending account is right for you depends on your financial situation.

An FSA can be helpful if you’re looking to increase your tax savings and take advantage of budgeting benefits.

However, if you have unpredictable healthcare expenses, you run the risk of losing unused funds at the end of the year.

On the other hand, if you're confident in your healthcare expenses and can plan accordingly, an FSA could be a smart choice for you.

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Conclusion

A flexible spending account can be a great tool for managing healthcare costs while also saving on taxes.

With careful planning, you can make the most of your FSA and use it on eligible expenses throughout the year.

If it fits with your financial and healthcare needs, an FSA can help you budget more effectively and reduce out-of-pocket costs.

To get personalized advice, reach out to your employer’s HR department, a benefits administrator, or a financial advisor.

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Frequently Asked Questions About Flexible Spending Accounts

1. Does an FSA reduce my overall healthcare costs?‍

Not directly. An FSA helps you save money by allowing you to use pre-tax dollars for eligible healthcare expenses. This lowers your taxable income and can reduce your overall tax burden.
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2. Can I use my FSA for any medical expense?

No, FSAs cover a specific list of eligible expenses, including prescription medications, doctor visits, medical equipment, and certain over-the-counter medications (with a prescription). Cosmetic procedures, insurance premiums, and elective treatments are generally not covered.

3. What happens if I don’t use all my FSA funds by the end of the year?

Generally, unused funds expire at the end of the year. However, some employers offer a grace period or allow a small amount to roll over. Check with your HR department for details.

4. Can I change my FSA contribution amount during the year?

‍In most cases, you can only set your contribution amount during open enrollment. However, certain qualifying life events (like marriage, the birth of a child, or a change in employment) may allow you to adjust your contributions.

5. How do I use my FSA at the pharmacy?

You can use your FSA card like a debit card to pay for eligible prescriptions and medical supplies. If you don’t have an FSA card, you can pay out of pocket and submit a reimbursement claim through your FSA provider.

6. Where can I get more information about my FSA?

For specific details on your FSA, including eligible expenses and contribution limits, reach out to your employer’s HR department, benefits administrator, or FSA provider.

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