HSA vs. FSA – How do these work with DPC?

HSA (Health Savings Account)

An HSA is a Health Savings Account, and it is sometimes offered to people who choose a high deductible health insurance plan.  I wrote a separate post on high deductible plans.  An HSA gives you the opportunity to save pre-tax money in a savings account that grows interest tax-free.  There are annual limits on what you can put in (2022 is $3650 for an individual and $7300 for families).  When you take out the money to pay for health care expenses, that money isn’t taxed either.  In the world of personal finance, this is a fantastic deal.  At the same time, the benefits of an HSA tend to go to people who have the extra money to save in an account like this.  However, an HSA is a great way to reduce the amount of risk that you are taking on with a high-deductible insurance plan, because you don’t lose this money at the end of the year.  It is your money, and you can save it for when you do have an expensive year and are going to meet your deductible.  I like to think of an HSA is a form of self-insurance for catastrophes.  Low deductible plans don’t offer HSAs because you are asking the insurance company to take on more of the risk for your health insurance costs, and so you don’t get access to this deal.

FSA (Flexible Spending Account)

An FSA is a Flexible Spending Account.  I am including it here because it causes confusion when discussing HSAs.  An FSA is sometimes offered by your employer as part of a health insurance plan.  If you are getting your insurance off the Marketplace, you don’t have access to an FSA.  FSAs are nice because they are also a savings account where you can put in money tax-free and take it out tax-free to use for qualifying medical expenses (there are long lists online of what is allowed).  In my opinion, FSAs are annoying because you have to estimate the amount of money that you want to put in an FSA at the beginning of the year and then you have to spend it or you lose it.  As someone who has had to use leftover FSA money to buy first aid kits that I didn’t need because I didn’t know that glasses were an allowable expense, I find them less useful than an HSA, but they can pair well with a lower deductible plan to cover co-pays, dental work and…glasses!

Can I use HSA or FSA money for Direct Primary Care membership fees?

This can be a thorny issue.  I am neither an accountant nor an expert on the many rules from the IRS.  From what I have read, FSA funds can sometimes be used for DPC membership fees.  It can be up to the employer to decide if it is an allowable expense.  My best recommendation on the use of HSA money for Direct Primary Care membership fees would be to ask your accountant.  Even if you can’t use your HSA funds for your DPC membership fees, you can save that money basically forever, so you could wait to use it until you need to pay for an MRI or a knee surgery!