Should I Contribute to a FSA or an HSA to Supplement My Health Insurance?

You made all of the big decisions about health insurance, and you finally have your health care plan in place…that should be enough, right? There’s one more decision you may want to consider – whether or not you are eligible to contribute to a Flexible Spending Account (FSA) or a Health Savings Account (HSA). Both are set up similar to bank accounts. You receive a debit card to pay for qualified medical expenses, or you can file for reimbursement directly from the account.

What is the difference?

A FSA is a tax-advantaged financial account that can be established through your employer. Each year during your company’s benefit open enrollment period, you can elect a set contribution amount that will be deducted from your paycheck pretax for the upcoming year.  A FSA is only good for one calendar year, and any unused funds that remain in the account at year-end are forfeited.

An HSA is an account that can either be established through an employer or individually (in conjunction with a qualified HSA compatible health insurance plan).

With employer plans, you can contribute pre-tax to your HSA and, unlike with a FSA, employers can contribute to your HSA account as well.  Individual HSA accounts are contributed to directly by the account owner and can be set-up through most banks.  And, the contributed money can be used as an annual tax-deduction to a certain limit. At the end of the calendar year any unused funds that remain in an HSA roll-over to the new year. Both FSAs and HSAs are easy ways to save money on taxes, especially if you have a lot of out-of-pocket medical expenses each year.

The funds in both accounts can be used for qualified out-of-pocket health expenses, such as some doctor’s bills, prescriptions, dental care and vision care.

Qualified medical expenses are determined by the IRS and can include the following:

  • Medical Expenses such as office visits and prescription costs/co-pays
  • Chiropractic treatments
  • Contact Lenses and Contact Solution
  • Glasses
  • And more

Some expenses that many people associate with health and wellness, such as nutritional supplements, gym memberships, weight-loss programs and over-the-counter medications, are generally not eligible for reimbursement.

Will an account like this be valuable to you? Ultimately, it depends on your specific health care needs, but it is certainly an option worth considering. To learn more about FSAs and HSAs, ask questions and see answers, visit

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