It’s that time of year. The holidays bring many things with them, including the reminder that any unused money in your Flexible Spending Account (FSA) won’t be there in the new year.
If you’re new to having your own health insurance, you might not even know the difference between an FSA and a Health Savings Account (HSA), or what you can spend that money on.
Here’s a simple breakdown of the difference between an HSA and an FSA and what you can and can’t spend that money on.
What is a HSA and how does it work?
HSA stands for Health Savings Account. An HSA works by allowing you to choose how much money you’d like pulled out of each paycheck throughout the year to be added to a savings account for expenses related to your healthcare needs.
Those savings are automatically taken out of each paycheck before it’s taxed and before you receive it and put into your HSA, which you can access through your health insurance provider.
Most people use their HSA to pay for things like deductibles and copayments for doctor’s visits, but you can also use it to buy healthcare products in stores like Target, Walgreens and CVS.
HSA accounts don’t empty any unused funds at the end of the year. Meaning, if you put $1,000 toward your HSA in 2024, that $1,000 will remain in your account in the new year.
What is an FSA?
Like an HSA, an FSA is a health savings account intended to reimburse you for healthcare costs not covered by your insurance.
Unlike an HSA, unspent money isn’t retained for the next year.
According to Healthcare.gov, if money is left in your FSA at the end of the year, your employer can offer one of two options:
- You get 2.5 more months to spend the leftover money.
- You can carry over up to $640 to spend the next plan year.
Can you have an HSA and an FSA?
No, you can’t have an HSA in the same year that you have an FSA.
HSA holders can have an LPFSA, though, which is a Limited Purpose Flexible Spending Account. LPFSA accounts can be used to pay for qualified dental and vision expenses and some post-deductible medical expenses.
What purchases are allowed with HSA?
The main difference between the lists of things you can and can’t pay for with these two types of savings accounts is that you can sometimes use HSA funds to pay for insurance premiums, whereas you can never use FSA funds to pay for insurance premiums.
You can use both to pay for prescription medications, feminine care products, medical devices, over-the-counter medications and other medical expenses.
HSA funds weren’t always eligible to be used for non-prescription OTC medications, feminine products, band-aids and other store-bought medical expenses. But due to the CARES Act that passed in 2020, a lot of previously ineligible expenses became HSA-eligible.
Although certain aspects of the CARES Act, like stimulus packages and loan relief, have since fizzled out, the expansions it made to include what can be covered by your HSA funds is still in effect.
Here’s a list of some of the things you can use your HSA funds for:
- Abortion
- Acne laser treatment
- Acupuncture
- Ambulance fees and emergency care
- Artificial limbs
- Birth control pills, injections, and devices, such as IUDs
- Blood pressure monitors
- Body scans
- Breast pumps and lactation supplies
- Breast reconstruction surgery following cancer
- Canes and walkers
- Childbirth expenses, such as care from a midwife or obstetrician
- Childbirth classes for the expectant mother
- Chiropractic care
- Contact lenses and saline solution
- Crutches
- Dental care, including cleanings, sealants, fluoride treatments, X-rays, fillings, braces, extractions, and dentures
- Diabetes supplies, such as blood sugar test kits and insulin
- Diabetes education, including nutrition counseling
- Eye exams
- Eye surgery, including laser surgery
- Eyeglasses, including prescription and reading glasses, and prescription sunglasses
- Blue-light-blocking glasses
- First-aid kits
- Flu shots
- Guide dogs to assist with disabilities
- Food, grooming, and veterinary care for guide dogs
- Hearing aids and batteries
- Hospital expenses for both inpatient and outpatient services
- Infertility treatment, including in vitro fertilization; egg, sperm, and embryo storage; fertility monitors; and sperm washing
- Egg donor expenses related to infertility treatment
- Inpatient drug and alcohol treatment
- Insulin
- Lab fees
- Long-term-care premiums, up to a qualifying amount based on your age
- Medical alert bracelets
- Medical records fees
- Medicare premiums if you're 65 or older, excluding Medicare supplemental policies
- Night guards to treat teeth grinding
- Nursing care, whether provided in your home or a nursing home
- Occupational therapy
- Oxygen and oxygen equipment
- Physical exams
- Physical therapy
- Prescription medications
- Psychiatrist care
- Psychologist care
- Smoking-cessation programs and drugs, including nicotine patches and gums
- Speech therapy
- Surgery, excluding elective cosmetic surgery
- Thermometers
- Tubal ligation (female sterilization) and tubal ligation reversal
- Ultrasounds
- Vaccines
- Vasectomy (male sterilization) and vasectomy reversal
- Wheelchairs
- X-rays
Here’s a list of items that you can use your HSA funds for under the CARES Act:
- Acid reducers
- Acne treatment
- Allergy and sinus medications
- Anti-allergy medications
- Breathing strips
- Cough, cold, and flu medications
- Eye drops
- Feminine hygiene products, such as pads, tampons, and menstrual cups
- Heartburn medications
- Insect repellent and anti-itch creams
- Laxatives
- Lip treatments for cold and canker sores
- Medicated shampoos and soaps
- Nasal sprays
- Pain relievers
- Skin creams and ointments, including cleansers, toners, and moisturizers
- Sleep aids
- Sunscreen and OTC remedies (like aloe gel) to treat the effects of sun exposure
Here’s a list of expenses that typically aren’t eligible to be covered by HSA funds:
- Child care for a healthy child
- Cosmetic procedures, unless they correct a deformity or treat an underlying medical condition
- Employment-related physical exams
- Funeral expenses
- Health insurance premiums, unless you have COBRA continuation coverage or receive unemployment benefits
- Imported medications that aren't FDA-approved
- Infant formula, even when the mother can't breastfeed
- Late payment charges and missed appointment fees
- Life insurance premiums
- Long-term disability premiums
- Marijuana, even if it's prescribed by a doctor
- Maternity clothes
- Toiletries
How do I know what items are HSA-eligible at CVS, Target?
To make it easier for you to find brands and items that are designated as HSA and FSA-eligible, you might want to consider shopping online or looking at your store’s website before you go shopping.
Target, Walmart, Walgreens and CVS have web pages organized to show HSA and FSA-eligible products only.
Target’s app even has an HSA and FSA-eligible item category up under the “health” tab, as of Nov. 26. 2024. To get there, open your Target app, click on the “health” tab at the top and scroll down until you see a banner that says “Last call for HSA and FSA funds.” After you click that banner, the app will show you HSA and FSA-eligible items by category (feminine care, baby care, cold and sinus, etc.).
