How To Use FSA and HSA Funds Before the End of the Year

FSA and HSA accounts can be a great way to save money on healthcare, but sometimes it can be hard to know when and how to use them – and they can be easy to forget about once you've set them up. The good news is that both types of accounts can be used to pay for a variety of out-of-pocket healthcare costs, such as:

• Copayments
• Deductibles
• Prescription drugs
• Over-the-counter (OTC) products like sunscreen, first-aid supplies and menstrual care products
• Medical testing

Now that it’s the end of the year, we want to remind you what FSAs and HSAs are, who’s eligible for them, and how they can help you keep costs down when stocking up on OTC cold medication, humidifiers, thermometers, home collection kits to test for flu and COVID-19, and more.

First, we’ll address some frequently asked questions about FSAs and HSAs.

HSA vs. FSA: What’s the difference?

A health savings account (HSA) is a tax-advantaged account to be used for healthcare expenses. It can be rolled over in its entirety from year to year. You must have a high-deductible health plan (of at least $1,400 for an individual or $2,800 for a family) to be eligible to open one, and it can move with you between jobs. It’s possible to enroll in an HSA through an employer or via private insurance. Contributions to HSAs are made with pre-tax dollars, meaning your taxable income is reduced by the amount you contribute annually.

Flexible spending accounts (FSAs) are similar but less flexible. You can only obtain one as an employee benefit and it can’t be carried over when you change jobs. For 2022, the FSA contribution limit set by the IRS is $2,850 pre-tax, while the maximums you can contribute to an HSA are $3,650 for individual or $7,300 for family coverage.

Are FSAs use it or lose it?

Yes, for the most part. Unlike with HSAs, unused balances in FSA accounts don’t usually roll over into the next year. Unless your employer’s FSA plan specifically allows a rollover (capped by the IRS at $570) or offers a grace period into the next calendar year, you forfeit the unused amount at the end of the current year. This is why it’s important to carefully consider how much money you contribute to an FSA based on your estimated medical expenses (e.g., anticipated doctor’s visits, medication costs, your deductible, and costs for dependents too, if you have family coverage). Younger, healthier people can be more conservative about their FSA allotment than people with known medical conditions that require ongoing treatment. The same considerations would apply for any dependents covered by your family FSA.

What does an FSA cover? What does an HSA cover?

FSA and HSA can cover the same expenses, though there are subtle differences between individual plans. Broadly, they cover out-of-pocket medical, dental and vision expenses, including deductibles, copays and prescription medication (though not insurance premiums). They also cover any number of OTC medicines, devices and products, including prenatal vitamins, breast pumps, neti pots, sanitary napkins, acne treatments, antibacterial ointments and sunscreen, so you can stock up on items you need with no limits on quantity. Check out this CNBC piece for other eligible items that may surprise you, like ancestry kits!

Additionally, FSA and HSA funds can be used to purchase lab tests to test and screen for a range of issues and illnesses, including vitamin deficiencies, anemia, COVID-19, flu and much more—all without a doctor visit or referral. You can simply order a test online using your FSA or HSA card and then visit a nearby lab to have your sample collected. Alternatively, you can collect your own sample with a home collection kit and ship it to a lab for analysis, depending on the type of test.

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Now that we’ve established the difference between HSA and FSA accounts and how they can be put to use in a broad context, let’s look at some specific scenarios.

Use FSA/HSA funds to buy COVID-19 tests

With doctors expecting higher rates of flu transmission this winter, variants emerging and COVID-19 continuing to circulate, you may want to prepare well in advance. You can stock up on home collection kits, including ones that simultaneously test for the flu and COVID-19, to test family members who show symptoms. 

You may also want to be tested for COVID-19 prior to holiday travel and gathering with family members. FSA or HSA funds can be used to purchase home collection kits in a more cost-effective way, since insurance won’t usually cover PCR COVID testing unless you’re symptomatic or were recently exposed to someone with COVID. (Rapid tests can be free and reimbursable.) If you need a PCR test, haven't been exposed to the virus and don't have any symptoms, learn about an additional PCR testing option here.

Use FSA/HSA funds for prescription drugs and copays

You can always use your funds for copays, or to purchase prescription drugs outright that your insurance might not cover. Keep this in mind in light of flu season and increasing COVID cases; your funds in reserve may be helpful if you or a dependent will need a prescription. Because influenza-specific antiviral drugs have been available for years, it is likely that SARS-CoV-2 antiviral drugs will become available, too. This includes Merck's COVID antiviral pill molnupiravir, for which Labcorp supported key clinical trials. Please consult with your care provider, as all these medications require a prescription. 

Use FSA/HSA funds to buy Over the Counter (OTC) products

You can also put FSA and HSA funds toward a range of OTC cold and flu medications, as well as air quality products like humidifiers to help people with respiratory infections breathe easier. Overall, this helps you prepare for what’s expected to be a tough cold and flu season while keeping your costs down.

Use FSA/HSA funds for general health tests

HSA and FSA accounts can make testing more accessible when you want to be more proactive about your health. This is especially relevant as we come out of the pandemic, since a large slice of the public put their health and wellness concerns on hold in order to avoid exposure to the virus, resulting in undiagnosed issues. (A CDC report found that 41% of U.S. adults had delayed or avoided medical care as of June 30, 2020, including urgent or emergency care and routine care.)

The good news is that lab tests investigating a wide range of issues, including Vitamin B12 and Vitamin D levels, diabetes risk, heart health, liver health, fertility and food allergies, can be purchased using an FSA or HSA card without a doctor’s referral. Better access to testing lets you show up to your next appointment informed and empowered—and able to ask the right questions to help guide your care.