HSA vs. FSA: What's the Difference?

Health care can cost a lot of money. Find yourself stressing over it? You’re not alone. A recent study by the Commonwealth Fund found that being able to afford health care is one of consumers’ top four biggest financial concerns¹.

We don’t have an easy way to “solve” health care costs — though think of the raise we’d get if we could! — but here’s one thing that might help cut yours: a savings account for health care.

There are two accounts that help you pay for health care expenses: Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).

These accounts are similar in many ways.

You generally won’t have to pay taxes on the money set aside in these accounts — which could cut your healthcare costs overall.
You can use these funds to pay for a wide range of medical and dental expenses (though not all expenses, so make sure you find out what qualifies).
You’ll typically get a debit card that links right to your account and makes it easy to pay for qualified expenses.

But there are some important differences to keep in mind when choosing the right plan to meet your needs.

Flexible Spending Accounts (FSAs)

An FSA can only be set up by your employer so talk to your HR department to learn if they’re available.
The annual limit on these accounts is currently $2,650.
They have a “use it or lose it” requirement — you have to spend whatever you put into the account the year you put it in (though your employer may allow a grace period or a carryover).
If you leave your job, you usually can’t take your FSA with you.

Health Savings Accounts (HSAs)

You can only qualify for an HSA if you have a high deductible health plan and this is the only health insurance you have — again, your employer’s HR department is a good place to learn more.
You can currently set aside $3,450 for yourself ($4,450 if you’re 55 or older) and $6,900 for a family each year — and the money in the account rolls over from year to year (so you don’t have to worry about putting just the right amount aside).
Just like a personal savings account, you’ll earn interest on your balance.
As long as you have a high deductible health plan, you can have an HSA. So, your HSA can move with you if you switch jobs, and if your employer doesn’t offer one, or you’re self-employed, you can set up a with Summit.