FSA vs HSA: What’s the difference?

Healthcare savings are hard to understand. Employers throw around acronyms like FSA and HSA, but many people don’t know about how they work. Let’s break it down:

What are FSAs?

FSA stands for Flex Savings Accounts. Your employer may offer you the opportunity to contribute to an FSA using pre-tax dollars. You’d typically use an FSA for specific medical needs such as copays for doctor appointments, dental procedures not covered by dental insurance (like an implant or a crown for a root canal), or glasses. You can also use FSA dollars for things like sunscreen, first aid kits, some acne treatments, and orthopedic braces.

How does an FSA work?

Let’s say you decide you’d like to put the maximum amount you can in an FSA account, which is $2,750. If you have a biweekly pay period, about $105 would be taken and paid towards your FSA account. This money is pre-tax dollars, meaning you aren’t taxed on this money; it comes out of your paycheck before you’re taxed. 

What are the benefits of an FSA?

When you have an FSA account, the money isn’t taxed. You continue to contribute to the account throughout the year, BUT you can use the entire amount at the start of the year. So say you needed physical therapy starting in January. You can start using your FSA on January 1 for physical therapy appointments, even though you haven’t contributed the full amount yet.

What are the drawbacks of an FSA?

FSAs only last for one calendar year. Typically, an employer will let you know of a grace period extending into the following year. In other words, you have to spend this money. If you don’t, you lose it. 

What are HSAs? 

HSA stands for Health Savings Account. As an individual, you are eligible for an HSA if you have a high-deductible insurance plan. An individual contributes to an HSA using pre-tax dollars, and uses that money towards the deductible until it’s maxed out.

How does an HSA work? 

You contribute to an HSA like you’d contribute to an FSA. Unlike the FSA, your HSA can follow you, AND you can roll over amounts year after year. In other words, an HSA is more like a savings account for medical-related expenses. In some cases your employer may contribute to your HSA account, but that’s not always guaranteed.

What are the benefits of an HSA?

You can invest HSA accounts, grow the money, and it never expires. HSA-qualified healthcare plans typically have lower premiums, meaning potentially greater savings. Also, you can keep your HSA through retirement, it’s always yours. 

What are the drawbacks of an HSA?

The biggest drawback of having an HSA account is the requirement that you must enroll in a high-deductible insurance plan. This means that you have more upfront costs before your insurance plan kicks in. If you have a lot of annual medical expenses, this may not be the plan for you. 

Can I use FSA or HSA money for physical therapy? 

Absolutely! You can use either account to pay for physical therapy appointments, including telehealth appointments.

Can I use FSA or HSA money for physical therapy products?

Yes! You can use either FSA or HSA money for orthopedic braces, hot/cold therapy, or other supportive products. 

FSA and HSA accounts can help save you money. If you have an FSA, don’t forget to use it all before the end of the year, otherwise it’s gone! Make an appointment with us at rombot.com/book or checkout our products at rombot.com/products.

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