HSA vs FSA: Understanding the differences

HSA vs FSA:  Understanding the differences

HSA and FSA sound similar. Both are related to healthcare spending. Both are personally directed. Both even end in “SA”. However, they are very different approaches to healthcare spending and understanding the difference is important. 

Flexible Spending Account (FSA)

A flexible spending account is a healthcare-related savings account with tax advantages. This can be self-funded or funded by an employer on behalf of an employee. Funds are contributed into this account on a pre-tax basis. Distributions from this account must be used to reimburse employees for qualified medical or dental expenses.

In some plans, individuals can spend the annual amount in the FSA in advance, similar to a line of credit.

Money set aside in an FSA generally must be used by year end. Some plans allow grace periods or roll over amounts, but in most cases, funds not used within those guidelines will be lost at the end of the period.

Additionally, FSA accounts cannot be moved with an employee who changed employment. These accounts are linked to the employer-provided healthcare plans.

Health Savings Account (HSA)

A health savings account is a tax-advantaged healthcare-related savings account that must be tied to a high-deductible health plan (“HDHP”). Contribution to this plan can be made by employers or employees. Funds from this account can be used to pay for qualified medical expenses that are not covered by HDHPs. Contributions can be used to cover medical, dental, vision, or prescriptions.


While there is a limit to the amount contributed annually into an HSA, the funds are never lost or expire. Individuals can use these funds to invest in stocks or securities to generate returns while they hold the funds.

Unlike FSAs, HAS holders cannot spend more than is available in their account, but they can hold receipts for future reimbursement as funds are deducted.

Coverage of DME / CPAP equipment

In general, CPAP Equipment and other prescribed DME are qualified medical expenses for both FSA and HSA funds. Just use your HSA/FSA card when you check out.

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