Differences between an HSA & FSA: Which One is Right for You? - ARCpoint Labs of Downtown Greenville
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Differences between an HSA & FSA: Which One is Right for You?

by | Dec 23, 2023 | Uncategorized

Health insurance can be tricky. You want to make sure you and your family are covered, but you don’t want to pay exorbitant premiums and ridiculous deductibles. You want a cost-effective option that is simple and easily accessible, but you don’t want to go through the hassle of traditional insurance.

An HSA or FSA may be the answer you’re searching for, but which one is right for you? Let’s look at both HSAs and FSAs and the pros and cons of each.

What is an HSA?

An HSA, also known as a health savings account, is a pre-taxed savings account that you can withdraw from to pay for certain medical expenses. Services and products such as eyeglasses, diagnostic services, dental work, medications, and even deductibles, copayments, and premiums are HSA-eligible.

An HSA can easily be set up by your employer at any time through your high deductible health plan (HDHP), but can also be established through your insurance company, bank, or credit union. The only requirement is that you must be enrolled in an HDHP.

What is an FSA?

An FSA, also known as a flexible spending account, is a pre-taxed savings account that you can withdraw from to pay for certain medical expenses. Most services and products covered by an HSA are also covered by an FSA, except for insurance premiums.

Additionally, an FSA such as a DCFSA (dependent care flexible spending account) can be used to pay for care expenses for a child under 13 or an adult who is physically or mentally unable to care for themselves.

Unlike the HSA, the FSA is only accessible through your employer, limited funds are rolled over to the next year, and you can only enroll during your employer’s open enrollment period.

Can FSA roll over to HSA?

An FSA and an HSA are two different accounts, and the IRS will not allow funds from one to be transferred to the other; however, you can enroll in an FSA one year and switch to an HSA the next year and vice versa.

What is the difference between an HSA and an FSA?

The primary difference between an HSA and FSA is that the FSA is owned by your employer; you must go through your employer’s open enrollment to invest, while an HSA is owned by you; you only need to be enrolled in an HDHP to invest.

Also, all funds roll over to the next year with an HSA while only limited funds roll over with an FSA, but unlike HSAs, you can access the entire year’s FSA contribution at the beginning.

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HSA pros

  • You own the account (no need for an employer)
  • Funds roll over from year to year
  • Funds can still be accessed after employment including if you change employers or enter retirement
  • Triple tax advantage (pre-taxed deposits, tax-free interest, tax-free withdrawals)
  • Insurance premiums are also covered

HSA cons

  • You can only access what has already been deposited
  • Childcare/dependent care is not eligible

FSA pros

  • You can access the entire year’s funds at the beginning
  • Childcare/dependent care is eligible

FSA cons

  • You must enroll through your employer and only during open enrollment
  • Only funds up to $610 can roll over to the next year
  • Insurance premiums are not eligible

Which is better: an FSA or HSA?

It depends. Like most things in life, there is no one size fits all. Choosing an FSA or HSA is all dependent on your unique circumstances.

Perhaps you and your spouse suffer from chronic pain or allergies, and you must visit the pharmacy often. An FSA may be better because you can use as much as you need right away instead of waiting until you deposit enough money.

Maybe you are single, healthy, and rarely go to the doctor. An HSA may be right for you as funds roll over to the next year, possibly being a timely money-saver if a medical situation arises.

Perhaps you are a single parent who is relatively healthy, but your child needs new braces. You may benefit from having both an HSA and a special type of FSA called a limited-purpose flexible spending account (LPFSA). The LPFSA is just like a regular FSA, but funds can only be used for vision or dental expenses. It can also be used for dependents, so your child’s braces are eligible.

Whatever your situation, choosing an HSA or FSA is not a decision to be taken lightly. Consult with your employer, insurance company, or financial advisor to determine your options.

What is HSA/FSA eligible?

As you’ve guessed, there are plenty of products and services that are HSA/FSA eligible. Here are just a few:

  • Acupuncture
  • Dentures
  • Band-aids
  • Birth control pills
  • Braille books
  • Breast pumps
  • Contact lenses
  • Chiropractor
  • Eyeglasses
  • Hearing aids
  • Long-term care
  • Physical examinations

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Who accepts HSA/FSA?

Doctors, hospitals, medical supply offices, medical testing labs, pharmacies, and more accept HSA/FSA payments.

ARCpoint of Downtown Greenville also accepts HSA/FSA payments without the hassle of insurance, the hustle of hidden fees, or the hangup of long wait times at the doctor’s office.

We offer many services that are HSA/FSA eligible, including

Conveniently located on Main Street in Downtown Greenville, just a few blocks away from the Greenville Zoo and only a short drive from Interstate 185, we welcome you to reach out and schedule an appointment or come to our lab as a walk-in. We’ll provide the diagnostic services and wellness care you need to take charge of your health and your life!

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