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HSA vs. FSA: What Is The Difference, And How To Choose?

Erica Dermer
5 minutes
Published:
Updated:
November 20, 2020
November 23, 2020

Towards the end of every year, you may start to see a flood of information about using your FSA or HSA account - but what does it all mean? If you don’t have a FSA or HSA fund now, it’s time to start thinking about plans for next year that might include one of these savings accounts. If you have an FSA or HSA in your health insurance plan currently, now is the time to use these funds, as some may expire at the end of 2020!


What’s the benefit of HSA or FSA? 

We all know that our health can change at any given moment. I’m sure you’ve had years where unexpected healthcare needs cropped up when you least expected it - and potentially couldn’t afford it. A health saving account (HSA) or flexible spending account (FSA) may help you proactively prepare for the year’s medical expenses and be in a better position should something unexpected happen. 


If you have a lump sum of funds available at the beginning of the year, it might be smart to invest it in these health care expenses throughout the upcoming year. If you’re eligible, starting an FSA or HSA account is basically giving yourself a gift card at the start of the year to be used for health care expenses. Items using HSA and FSA are not taxed, saving you any money that you’d spend on taxes on health care costs - this could actually result in some major savings!

What is an HSA? 

A Health Savings Account is for those with a high-deductible insurance plan. With an HSA, you can set aside money to pay for qualified medical expenses without the tax. This means you’re not taxed when you put money into an HSA, you can grow your HSA funds tax-free over time, and you're not taxed when you pay for qualified medical expenses with your HSA. HSA helps you save big-bucks. 


What can you pay for with an HSA? Those high monthly deductibles, copayments, coinsurance, and some other expenses - including things like over-the-counter pain relief, feminine hygiene products, allergy medication, and even blood tests. It can even help pay for contacts, glasses, and even chiropractor visits or massage appointments. Again, all of these things can be paid for without tax. If you’re looking for a great list of HSA-eligible expenditures, you might want to check out HSA Store! Keep in mind that some accounts have different eligibility requirements. 


Once enrolled in a high deductible health insurance plan with an HSA, the next step is connecting with an HSA-eligible baking institution. Each bank will handle your savings account differently, so do research that takes your core needs into account in advance. With some accounts, you can even invest these funds like a savings account and watch your money grow with little effort. However, there are limits to how much you can contribute into a health savings account per year ($3,550 for an individual in 2020, and $3600 for 2021).  


It’s important to note that HSA funds typically roll over year to year, so there’s no rush to spend anything towards the end of the year - unless you want to treat yourself! Nearing the end of the year, it may be wise to piggyback on Black Friday, Cyber Monday, and other major shopping days to maximize these funds. 


What is an FSA?

A Flexible Savings Account is set up by your employer with certain health care plans. An FSA is a savings account for the year, meaning you can put money away from pre-tax income that can be used to pay for out-of-pocket health care costs. Much like an HSA, you won’t pay any taxes on things purchased with your FSA. 


FSAs can work in a few different ways. You might have this flexible spending account paid by pre-tax income taken out of your paychecks throughout the year. You might have to submit claims on things purchased with your FSA to your employer to receive reimbursement for your costs. Connect with your HR provider if you’re curious about learning more about your specific FSA account. 


Once you decide on a dollar amount for your FSA for the upcoming year, you can’t change it. Because of this, it’s smart to run a tally on past health care costs to get a good idea on how much you typically spend in a calendar year. Like an HSA, you can use FSA funds for things like deductibles, copayments, prescription medication, and approved medical equipment. FSA Store has a handy list of those things most-likely to be covered with FSA funds. 


For most, FSA funds expire at the end of the year - so the rule of thumb here is - use it or lose it! Your employer will keep any remaining funds you have at the end of the year, although some may offer a grace period of a few months.


What’s the difference between FSA and HSA? 

  • How they are obtained: An FSA is accessed through your employer, while an HSA is accessed through self-employment health insurance or the health insurance marketplace. Only select health insurance plans are HSA eligible. 
  • Expiration dates: Think of FSAs like a prepaid debit card with an expiration date on the funds. Meanwhile, a HSA is your personal savings account for medical expenses with no expiration date, and no ties to an employer. 
  • Contribution limits: An HSA usually has a higher contribution limit than a FSA. 


Are imaware™ tests eligible?

FSAs and HSAs are great tools for purchasing at home blood tests like imaware™, as these accounts can be used to cover the costs of medical equipment or diagnostic devices. Please consult the IRS for more information about medical expenses.

Please check with your benefits coordinator in advance to make sure the test that you want to order is qualified with your particular plan. We provide an itemized receipt with each imaware™ test order that can be submitted to your FSA/HSA account. If you need any help with your receipt, please email support@imaware.health.


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Erica Dermer
Consumer & Patient Engagement at imaware™

Erica is as a food & wellness expert with an established reputation as a celiac & autoimmune disease influencer. Writing, editing, appearing on TV and publishing her own book, Erica campaigns and supports those with autoimmune diseases using everything she has learned through her career and living life with celiac disease.