Insurance brokers, as your clients examine options for enrolling in health benefits, you probably hear a lot of questions on plan types. What are my costs? Which best fits my lifestyle? Those inquiries are only the beginning.

If any of your groups offer their employees tax-favored health programs, like Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), be ready to explain the concepts and benefits, as well as the differences if an employer provides more than one option.

While many might do their own research, it can sometimes be overwhelming for employees that might not be familiar with these programs or feel ready to enroll in one due to lack of understanding or mistrust. That’s where you come in. Their trusted broker, to help them weed through the various fact and opinion that can populate from a simple Google (or ChatGPT) search. A great place to start is by addressing the key differences between the two programs, as well as the misconceptions. Let's start with the basics.

What are the differences between HSAs and FSAs?

Health Savings Accounts (HSAs)

• Think of it as a personal savings account owned by the individual for paying qualified health expenses.
• Only individuals with high-deductible health insurance plans (HDHPs) are eligible. As HDHP purchases have increased under the Affordable Care Act, more Americans qualify for participation in an HSA.
• Both the individual or employer can contribute to the account. (For 2026, the maximum contributions are $4,400 for self-only coverage and $8,750 for family coverage).
• The individual owns the account; it is portable if the individual changes jobs and contribution levels can be changed at any time.

Flexible Spending Accounts (FSAs)

• FSAs are set up and owned by the employer, but both the individual or employer can contribute to the account. (The new 2026 maximum contribution is $7,500 per household or $3,750 per individual,).
• Contributions are typically determined per plan year and cannot be changed.
• Use it or lose it: Money cannot generally be carried over from one plan year to the next, but grace periods up to two and a half months are permissible.
• FSAs are typically not portable with changes in employment.

What do these programs do? Enrollees use these accounts, which often are linked to debit cards, to pay for planned or unplanned “qualified medical expenses.” The IRS sets parameters for qualified expenses, which can include general medical and dental costs through the health plans an individual has through his or her employer.

The next point to address might be, “where do the funds come from?” HSAs and FSAs are funded through regular payments by the individual, his or her employer, or a combination, depending on the type of account.

Your clients might be wondering, “what’s in it for me?” Well, enrollment in both types of accounts offer certain tax advantages. One example is that contributions made into an HSA or FSA by an employer can be excluded from the individual insured’s gross income. Withdrawals for qualified medical expenses are generally tax-deductible.

Eligibility. Anyone can open an FSA, while only individuals with high-deductible health insurance plans are eligible for an HSA, as we mentioned above. As of 2025, the individual deductible for an HDHP was a minimum of $1,650 for individuals, and $3,300 for a family.

When the money must be used. An HSA is a savings account. An FSA is a spending account. This is an important distinction. Money in an HSA does not have to be used in the year it's set aside. In many cases, an HSA becomes a lifetime medical savings account. However, funds contributed to an FSA must generally be used the same year it is set aside, with up to a two-and-a-half-month grace period allowed in certain circumstances.

What is considered a qualifying expense? Can HSAs and FSAs be used for medical and dental costs? The answer is yes! Some types of FSAs can not only be used for medical and dental expenses, but also day care for children or elderly dependent adults. Qualifying expenses for an HSA include only health-related expenses, like co-pays, deductibles and drug costs.

If you’re an insurance broker, assume your clients “know nothing” and take the time to explain HSAs and FSAs to those eligible. By breaking it down to the basics, your clients will have a better understanding of their options and feel more secure in their choice in plan, and their choice in broker.