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Differences Between an HSA and FSA
The world of health insurance can be complicated, as many types of plans may offer various advantages and include certain drawbacks. Two prominent and popular health insurance options potentially available to you and your family are health savings accounts (HSAs) and flexible spending accounts (FSAs). By understanding these coverage options, you may position yourself better to endure future health care expenses.
Understanding HSAs and FSAs
HSAs and FSAs are often offered by employers as employee benefits and serve as savings accounts specifically for medical expenses. These accounts can be used to help policyholders set aside funds for medical services and products down the road. Specifically, HSAs and FSAs can help you meet your deductible or manage copays, potentially limiting expenses that would have otherwise needed to be paid out of pocket.
Key Differences Between HSAs and FSAs
Although HSAs and FSAs may serve similar purposes, there are several departures that may require you to weigh your unique circumstances. When determining which type of account may be best for you and your future, consider the following:
- Contribution methods—Under an HSA, both the policyholder and their employer may make pre-tax contributions. In the case of FSAs, deposits are generally made through a direct paycheck deduction. As such, an employee may be able to use contributions to lower their taxable income.
- Restrictions—HSAs require policyholders to also enroll in a high-deductible health plan. Additionally, those enrolled in Medicare or claimed as a dependent on someone else’s tax return are typically ineligible for an HSA. FSAs are typically only available through an employer and funds cannot be withdrawn to cover services in tandem with coverage purchased through the Health Insurance Marketplace.
- Limits—Policyholders are subject to limits regarding how much they are allowed to contribute toward HSAs and FSAs in a single year. For example, in 2024, those with an individual health insurance plan are permitted to deposit up to $4,150 to their HSA. Meanwhile, in 2024, individual contributions toward an FSA are capped at $3,200.
- Duration of savings—Funds in an HSA can usually be rolled over at the end of each year, allowing policyholders to continue to build their accounts and grow their health care savings. However, FSAs typically require you to spend funds by the end of the year, albeit with limited exceptions in some instances.
Deciding between an HSA and FSA may come down to personal circumstances, such as financial goals, employment status and overall health. Your United Benefits Solutions representative can help assess your circumstances and recommend coverage.
Learn More About HSAs and FSAs
Contact United Benefits Solutions today to learn more about these valuable health insurance options. By working with our knowledgeable and dedicated staff, you can position yourself to best manage future health care bills and medical needs.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.
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