FSA vs. HSA: What’s the Difference?

3 min read Mar 13, 2023

Depending on your health insurance plan, you may have access to a health savings account (HSA) or a flexible spending account (FSA). Both HSAs and FSAs are tax-free savings accounts meant to cover healthcare costs.

HSAs provide a more flexible and portable option, but they’re only available with a high-deductible health plan (HDHP). Meanwhile, FSAs have more restrictions and are typically offered as an employee benefit.

Let’s dive a little deeper into what FSAs and HSAs are, how they work, and the differences between the two.

FSA vs. HSA: Key differences

	FSA	HSA
Who’s eligible?	Employees at organizations that offer FSA as an employee benefit	Individuals with a high deductible health plan who aren’t covered under any other health insurance coverage
Who can contribute?	The account holder and their employer.	The account holder, their employer, and family members
What is the maximum contribution amount?	$3,050, with a maximum of $5,000 per household or $2,500 for married couples filing separately in 2023	$3,850 for an individual and $7,750 for a family in 2023
Does it earn interest?	No	Yes
Does the money roll over year-to-year?	No	Yes
Is the account portable if you change jobs?	No	Yes

What is an FSA?

An FSA is a tax-advantaged savings account where you set aside money through payroll deductions to help pay for qualified medical expenses. FSA funds don’t roll over at the end of the year. So during open enrollment, you’ll have to decide how much money you want to set aside for the year, which can be difficult.

If you don’t use all the funds by the end of the year, you may forfeit the balance. If you leave your job before the year is up, you’ll also likely forfeit the balance.

Employees can set aside up to $3,050 in 2023, with a maximum of $5,000 per household or $2,500 for married couples filing their taxes separately.¹

What is an HSA?

An HSA is another type of tax-advantaged savings account where you set aside money through payroll deductions to help pay for medical expenses — like copays, prescription medications, or other expenses related to diagnosing, treating, or preventing illnesses.

HSA funds can roll over at the end of the year and have higher contribution limits. Like a traditional savings account, HSA funds earn interest on the pre-tax money contributed to it and can even be invested, making it an additional savings vehicle.²

HSA qualifications

To use an HSA in 2023, you must be covered under an HDHP with a minimum deductible of at least $1,500 for individual coverage, or $3,000 for families, and a maximum out-of-pocket amount of $7,500 for individual coverage, or $15,000 for families. In addition, you can’t be covered under any other health plan that’s not an HDHP, with limited exceptions. The maximum HSA contribution is $3,850 for an individual, or $7,750 for a family.³

Unlike FSAs, HSAs are portable, meaning you can carry over unused funds from one year to another. You don’t risk losing money that wasn’t spent during the year. Plus, if you decide to leave your job or the workforce, you can take your HSA with you.

Key differences between HSA and FSA:

The main difference between an HSA and an FSA comes down to flexibility.

With an HSA, there are often higher contribution limits compared to an FSA, and HSAs are portable. You’re also able to roll over your remaining balance from year to year with an HSA, while an FSA typically doesn’t allow for that.

Additionally, an HSA acts similarly to a savings account and earns interest over time. However, the caveat of an HSA is that you must have a HDHP to be eligible. Another important difference between HSAs and FSAs is if you’re self-employed, you won’t be eligible for an FSA, as they’re only available through an employer.

How to spend FSA and HSA funds

Funds from an HSA or FSA can only be used on qualified medical expenses. Typically, these costs are anything that could be deducted as medical expenses on your income tax returns.⁴ They often include:

Doctor’s visits
Lab tests
Hospital stays
Prescriptions
Dental and vision care

To determine the best ways to spend your tax-free funds, look at the FSA and HSA product eligibility lists. Also, be sure to ask your human resources representative if you need more information about these benefits.

HSA vs. FSA: Which is better for you?

While the decision between an HSA and FSA depends on your specific circumstances, an HSA often offers the most flexibility. It also allows you to roll over unused money and has higher contribution limits. However, you must be enrolled in an HDHP, as they’re not accessible to everyone.

If an HSA isn’t available to you, an FSA can be a good alternative, since it still uses pre-tax money to pay for medical expenses. However, it’s important to remember that unused funds may disappear at the end of the year and don’t roll over.

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^{1 “}Flexible Spending Accounts Program – New 2023 Limits For The HCFSA And LEX HCFSA” Office of Human Resources, 2023

²“What Are the Pros and Cons of a Health Savings Account (HSA)?” Investopedia, 2022

³ “IRS Announces Spike in 2023 Limits for HSAs and High-Deductible Health Plans” SHRM, 2022

⁴ “What are Qualified Medical Expenses?” U.S. Department of Health & Human Services, 2021

This article is intended to provide general information about insurance. It does not describe any Metropolitan Life Insurance company product or feature.