Imagine that a friend tells you her employer has given her a choice between two health insurance plans. She must choose between a PPO insurance plan with a flexible spending account (FSA) that has a limit of $2,500 OR high-deductible plan with a health savings account (HSA), to which her employer will contribute $1,000. Your friend has a spouse and two children who will be on the plan. Her premiums on the high-deductible plan will be $1,000 less per year than on the other plan. However, the deductible for the regular PPO plan is $1000 per individual and $3,000 family, and on the high-deductible plan is $2,000 individual and $4,000 family.

Requirements

1. Explain which plan you would tell your friend to choose and why.
2. Explain which you would rather have—a flexible spending account or health savings account, and why.
3. If you were an employer, would you offer both, or only one? Describe the benefits of your choice.