Health savings accounts (HSAs) and flexible spending accounts (FSAs) are two types of tax-advantaged accounts that can help consumers manage the cost of qualified medical expenses. Understanding how each account works can help agents have more informed conversations with consumers during plan shopping.

In this article we'll cover:

A health savings account (HSA) is a tax-advantaged account that consumers can use for qualified medical expenses. Eligible HSA contributions may be excluded from or deducted from federal taxable income, and distributions used for qualified medical expenses are generally tax-free. State tax treatment can vary.

Key features of an HSA:

An HSA is not an insurance plan. It is a personal savings account that works alongside an HSA-compatible plan.

An HSA-compatible health plan is generally a qualifying high deductible health plan (HDHP). Having an HSA-compatible plan allows an eligible consumer to open and contribute to a health savings account. Having an HSA-compatible plan does not require the consumer to open or contribute to an HSA; it gives the consumer the option to do so.

The health plan and the HSA are separate. The insurance plan covers medical care, while the HSA is a financial account the consumer chooses to open and manage independently.

Beginning January 1, 2026, Bronze and Catastrophic plans on the individual market are treated as HSA-compatible.

To open and contribute to an HSA, the consumer must meet all of the following criteria:

HSA eligibility is generally determined on a monthly basis.

An HSA is a personal savings account. To open an HSA, the consumer should contact an HSA provider, such as a bank, credit union, or other financial institution. The account is not created through the carrier or through HealthSherpa.

A flexible spending account (FSA), also called a flexible spending arrangement, is an employer-sponsored benefit that lets employees set aside pre-tax money to pay for qualified medical expenses such as doctor visits, prescription drugs, dental care, and vision costs.

How an FSA works:

Employers can offer different types of FSAs. A general-purpose health FSA reimburses a broad range of qualified medical expenses, a limited-purpose FSA generally reimburses only eligible dental and vision expenses, and a post-deductible FSA begins reimbursing expenses only after the consumer meets the plan deductible.

FSAs are established and administered through an employer and are tied to the employee's job. Funds typically must be used by the end of the plan year unless the employer offers a carryover or grace period.

An FSA is not an insurance plan or a personal savings account. It is an employer-sponsored benefit used to offset eligible expenses.

HSAs and health FSAs generally cover many of the same qualified medical expenses, including deductibles, copayments, coinsurance, prescription drugs, and many dental, vision, and over-the-counter items.

One important difference involves premiums. An HSA can cover certain premiums (such as COBRA, qualified long-term care insurance up to applicable limits, and Medicare for consumers age 65 or older, though not Medicare supplements like Medigap), while a health FSA generally cannot be used for premiums at all. Because each employer's FSA plan can also set its own rules within the federal framework, consumers should confirm which expenses their specific plan reimburses.

Some retailers label products as HSA- or FSA-eligible. While these labels can be a helpful shopping reference, they are not a guarantee the expense will qualify as an eligible expense. Consumers should confirm eligibility with their HSA provider or FSA administrator and keep appropriate documentation.

This can depend on the type of FSA. A consumer can have both an HSA and an FSA, but coverage under a general-purpose health FSA generally makes the consumer ineligible to contribute to an HSA. This may include coverage through a spouse's general-purpose health FSA.

A limited-purpose FSA or a post-deductible FSA may be compatible with HSA contribution eligibility. Consumers should consult a tax advisor for guidance specific to their situation.

No. HealthSherpa is a health insurance enrollment platform and does not open or administer HSAs or FSAs. Consumers should contact an HSA provider for information about opening or managing an HSA, and their employer for information about enrolling in or using an FSA.

Yes. The IRS sets HSA contribution limits each year, and adjusts them periodically for inflation. For 2026, the limit is $4,400 for self-only HDHP coverage and $8,750 for family coverage.

The limit depends on whether the consumer has self-only or family HDHP coverage. Consumers age 55 or older who are not enrolled in Medicare can contribute an additional $1,000 catch-up amount, which is set by statute and does not change with inflation. The annual limit applies to total contributions from all sources combined, including any employer contributions.

HSA and FSA eligibility and tax treatment can depend on a consumer’s individual circumstances. Consumers should consult a tax advisor for guidance about contributions, distributions, or tax reporting.

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