What Is the Difference Between an FSA and HSA?

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When it comes to managing healthcare costs, Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) can each offer powerful benefits. However, both of these tools have their ups and downs, their negatives and positives, and one may be better for you and your family than the other.

Both FSAs and HSAs help you save money by allowing you to set aside pre-tax dollars for medical expenses. However, they differ in terms of eligibility, rules, and long-term benefits. Whether you’re planning ahead for routine checkups, or considering a preventative CT scan to take charge of your health, knowing how these accounts work is essential to your financial planning.

Today, we’ll break down the difference between FSA and HSA, tell you a bit about their pros and cons, and help you understand the key differences between them. We’ll also help you understand how they apply to preventative health services, like CT scans, at Preventative Diagnostic Center.

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Understanding Flex Spending Accounts (FSA)

A Flexible Spending Account (FSA) is a savings account you can use to pay for medical expenses with pre-tax dollars. This means before your income is taxed by the government, these dollars can be placed in your FSA to use for medical expenses. This helps you save money in taxes, and ensures your healthcare income goes further.

This type of savings account is established by your employer. FSAs are typically part of a benefit package, and must be set up through your work, meaning self-employed people and those whose workplaces don’t offer them are not eligible.

Generally, the expenses must be approved by the program. This means not in all instances will be approved for use, like with cosmetic procedures, for example. If you have a flex spending account, your policy documents should have more information about what is covered. In this way, Flex Spending Accounts are like insurance.

Flex Spending Account Pros

Tax Savings

Perhaps the greatest benefit of Flex Spending Accounts are the tax savings. Contributions are deducted from your paycheck before taxes, lowering your taxable income, similar to a business expense.

They carry another tax benefit as well: the money entering into the account goes further because it is not taxed and you keep 100%. Depending on your individual tax rate, this can be significant.

Utility

Although there are some restrictions on what the funds in an FSA can be used for, these funds generally have a wide range of uses. These can include things insurance doesn’t cover, such as prescription and doctor co-pays. Funds can also often be used for things like medical equipment that are often under covered by insurance.

Access

In general, you can use the full annual amount at the beginning of the plan year — even if you haven’t contributed the full amount yet. This is a unique feature of FSAs and allows more flexibility when medical emergencies or needs happen, even early in the year.

Flex Spending Account Cons

You May Lose Funds if You Don’t Use Them

This is perhaps the biggest drawback of Flex Spending Accounts. If you don’t use the funds by the year or period end, you may lose them. If this is the case, it makes an enormous amount of sense to use the funds for preventative scans, like those we offer here at Preventative Diagnostic Center.

Employer Owned

In the same vein as above, your employer technically owns the fund. If you leave your job, you may have to forfeit your unused funds. Depending on your particular setup, you may not have to pay the rest of the plan, even if you’ve used more benefits than you have paid in the year.

This carries over to portability as well. If you leave your job, it is unlikely you’ll be able to transfer it to another workplace.

Understanding Health Savings Accounts (HSA)

A Health Savings Account (HSA) is a personal savings account for health expenditures. It is often used for those who have high deductibles on their insurance plans. Like the Flex Spending Accounts above, you can contribute pre-tax income and use the funds for qualified medical expenses.

Health Savings Account Pros

Even Better Financial Advantages

Health Savings Accounts have the advantages of FSAs above. Contributions lower your overall tax burden, and your money goes further because it wasn’t taxed before it went in the savings account. Withdrawals for eligible expenses aren’t taxed either, so don’t worry about being taxed at the back end for using the plan.

However, HSAs have an additional benefit. The funds grow in the savings account due to compound interest, a feature generally not found in the FSAs. Depending on the interest rate, this can be significant.

Some of these funds even allow for different investment options of the funds, helping them to grow even faster.

Funds Roll Over

You don’t have to worry about using your funds in a single year, as there is no period in which you must use them. Health Savings Accounts work like a regular savings account in this manner, the difference being you may only use these funds for approved healthcare related expenditures.

Portability

Unlike the FSAs above, these funds stay with you no matter where you go. With an HSA, you’re not tied to an employer and don’t need to worry about losing any money when switching or losing a job.

Health Savings Account Cons

HDHP Eligibility

When it comes to HSAs, you’re only eligible if you are enrolled in a High Deductible Health Plan, or HDHP. These have very specific limits set by the federal government, and not everyone is enrolled in one.

You’re also not eligible if you have secondary insurance that helps cover these higher deductibles, like if you’re enrolled in Medicare or Medicaid and some other stipulations. You can speak to your insurance provider or your tax advisor for more information on if you’re eligible for an HSA.

Caps

The amount of money you can contribute per year tax free is capped by the federal government. In 2025, the cap is $4,150 for individuals, and $8,300 for families.

Penalties

If the funds are used for non-medical expenses or medical expenses not approved or covered, there is generally a tax penalty if you’re under the age of 65. This penalty is as much as 20%, a significant amount.

The Main Differences Between an FSA and an HSA

The main difference between a Flex Spending Account and a Health Savings Account is who owns and manages the plan. With a flex spending account, your employer is the owner and manager of the plan. With a health savings account, you, the individual, are the owner and manager.

HSAs also allow for rollover year over year where FSAs usually don’t (although your plan may vary), HSAs can be taken from job to job without worry, and HSAs allow for investment growth.

However, with an HSA, you must be enrolled in a high deductible health insurance plan, and there may be other restrictions. Anyone may enroll in an FSA, as long as their employer offers this benefit.

Can an FSA or HSA Be Used To Pay for CT Scans?

In most cases, yes.

Both Flexible Spending Accounts and Health Savings Accounts are generally eligible to purchase diagnostic scans, including those offered by Preventative Diagnostic Center. Even when insurance will not completely cover these scans, both FSAs and HSAs can often be used.

It’s always a good idea to check with your FSA or HSA provider for specific coverage rules, but in general, diagnostic services fall well within the allowable expenses.

Book Your Preventative CT Scan With Preventative Diagnostic Center Today

Proactive healthcare saves lives, and having an FSA or HSA can make it more affordable. At Preventative Diagnostic Center, we specialize in early detection of potentially life-threatening conditions, including heart disease, lung issues, and cancer. Through our various health scans, like CT Scans, we can detect diseases before they become an even bigger problem.

Early detection has proven to improve outcomes for many different chronic diseases, like the ones above, including cancer. By detecting these diseases early, your chances of survival and for increased comfort multiply. Compared to the potential benefits and the peace of mind, there are almost no downsides to having scans done, especially if you’re getting older, and if your HSA or FSA will cover the cost.

Using your FSA or HSA, you can invest in peace of mind and early detection without compromising your budget. These scans can help keep you around and stay healthy for your family and yourself for years to come.

Don’t wait. Book a CT scan, or other health screening, with Preventative Diagnostic Center today.