How to Win the Health Savings Game: A Guide to HSAs and FSAs

Unlock tax advantages using FSA and HSA — A key to unlock tax advantages

Created by Chris Caffrey, ACNP, PMHNP

January 7th 2025

Full disclosure: the whole alphabet soup of HSAs and FSAs sounds about as thrilling as sorting your sock drawer. But if you’re not paying attention, you could be leaving pre-tax dollars—essentially free money—on the table. And who in their right mind likes throwing money away? Not you.

So let’s cut through the nonsense and figure out how these accounts can actually work for you, without the boring tax jargon.

HSAs: The VIP Lounge of Health Savings Accounts

Imagine an exclusive club where the perks are so good, you almost feel like you’ve hit the jackpot. That’s what a Health Savings Account (HSA) is all about. It’s the VIP lounge of health savings—only available if you’ve got a high-deductible health plan (HDHP), but once you’re in, it’s pretty sweet.

In 2025, you are considered to have a HDHP if your individual annual deductible is $1,650 or $3,300 for family...isn't that everyone? (almost). If you qualify, you can use your insurance affiliated HSA, or open a HSA account yourself through a HSA administrator such as Fidelity.

With an HSA, you can make tax-free contributions, enjoy tax-free growth, and take tax-free withdrawals for qualified medical expenses. Yes, it’s like having a magic unicorn that saves you cash every time you need to see a doctor or buy prescription glasses.

So, how do you know if you’re eligible?

Check Your Health Plan: Look for the terms “HSA-qualified” or “HDHP” on your plan documents. If it’s not glaringly obvious, your HR department or insurance provider should be able to tell you.
Read the Fine Print: Make sure your plan’s deductible and out-of-pocket limits line up with IRS requirements. If math isn’t your strong suit, don’t worry—there are plenty of online calculators that do the heavy lifting for you.
One-Plan Rule: If you’re covered under another non-HDHP plan (say, through a spouse’s employer), then sorry, you can’t join the HSA club. It’s exclusive, after all.

If you're eligible, establishing an HSA is generally straightforward. Many employers providing HDHPs will allow you to enroll in an HSA, though investment options may be limited. Regardless of whether they offer this, you can also open one independently through another HSA administrator or credit union. It's important to compare options for low fees and good investment choices—indeed, you can grow your HSA funds like a retirement account, similar to a ROTH.

I can't say enough about setting up a HSA with Fidelity: easy to set up, no fee's and you may invest in almost anything you choose...including bitcoin.

A Real-World Example: Imagine you’re in the 22% tax bracket and you decide to contribute $3,000 to your HSA. That move alone shaves off about $660 in taxes right off the bat. And if you’re savvy and invest that money, it grows tax-free, giving you an ever-growing cushion for future medical expenses or even retirement. It’s like getting a discount on every doctor visit, prescription, and medical gadget you ever need.

And here’s a bonus tip: Companies like FlexUp Wellness PLLC are there to help. They can evaluate your situation and help secure a Letter of Medical Necessity to cover items like gym memberships, supplements or home gym equipment—things that normally wouldn’t qualify. That’s extra free money in your pocket.

FSAs: The “Use It or Lose It” Happy Hour

Now, let’s talk about Flexible Spending Accounts (FSAs). If HSAs are the VIP lounge, FSAs are like that fun, no-frills happy hour you don’t want to miss—except there’s a catch. FSAs allow you to set aside pre-tax dollars for medical expenses, but they come with a strict “use it or lose it” rule. In other words, if you don’t spend the money by the end of the plan year (or within the grace period your employer might offer), it’s gone. Poof. Just like that.

The good news?

You don’t need a high-deductible plan to qualify for an FSA. All you need is that golden ticket from your employer. But, if your company doesn’t offer one, then this option isn’t for you.

Here’s how to check if you’re in the FSA club:

Ask HR: A quick email or chat with your HR rep will let you know if your employer offers an FSA. They’re usually happy to help—after all, they like hearing about ways to save money too.
Review Your Benefits Package: Look for a section on “Flexible Spending Accounts” or “Pre-Tax Benefits” in your benefits booklet or on the employee portal.
Keep an Eye on Open Enrollment: FSAs are typically something you sign up for during open enrollment, so watch out for emails and announcements when that window opens.

A Word of Caution: Since FSAs are “use it or lose it,” you need to plan carefully. Only contribute what you’re confident you’ll spend on medical expenses over the course of the year. Overestimating means you might end up forfeiting unused funds. On the flip side, if you have predictable costs like regular copays, prescription refills, or ongoing treatments, an FSA can be a real money-saver.

For Example: Let’s say you know you’ll need new glasses, a few doctor visits, and maybe some dental work in the coming year. An FSA allows you to pay for these expenses with pre-tax dollars. Even if you don’t invest the money like you might with an HSA, you’re still saving by not having to pay tax on those dollars when you spend them. And if you ever have an unexpected expense or want to cover something a little outside the norm, FlexUp Wellness PLLC can step in to help you get a Letter of Medical Necessity, thereby broadening what your FSA can cover.

Why Bother with HSAs and FSAs?

Now, you might be thinking, “Why should I even bother with these accounts? I can just pay for my doctor visits and prescriptions out of pocket.” And sure, that’s an option—if you enjoy burning through your cash like it’s confetti at a parade.

Here’s the bottom line: both HSAs and FSAs let you use pre-tax dollars, which effectively gives you a discount on your medical expenses. Imagine your money skipping the tax line and going straight to work for you. With an HSA’s triple-tax advantage (contributions, growth, and withdrawals are all tax-free), it’s a no-brainer if you’re eligible. And with an FSA, even though you have to be a bit more careful with your spending, you’re still saving money on every expense.

Let’s put it in perspective:

With an HSA: If you contribute $3,000 and you’re in the 22% tax bracket, you’re instantly saving around $660 (not including state taxes). Over time, if you invest those funds, you could have a substantial nest egg for future health expenses—or even supplement your retirement savings.
With an FSA: Every dollar you set aside is a dollar that isn’t taxed, so you’re effectively getting a discount on every qualified medical expense you incur throughout the year.

Think of it this way: medical bills can be as unpredictable as your favorite band’s reunion tour. In a world where healthcare costs are rising faster than your rent, these accounts can help cushion the blow. You’re not just saving money; you’re reclaiming control over your finances and your health.

The FlexUp Wellness PLLC Advantage

Enter FlexUp Wellness PLLC. They specialize in helping folks unlock FSA/HSA benefits using a Letter of Medical Necessity after a quick, convenient health evaluation. This little piece of paper can be the key to unlocking coverage for a whole host of wellness treatments that you thought were off-limits...think gym memberships, fitness classes, supplements, vitamins, therapeutic mattress, and many other treatments that are considered "non-eligible."

Final Thoughts

Let’s face it: dealing with healthcare finances isn’t the most glamorous part of life. But ignoring HSAs and FSAs is like leaving money on the table. When you’re in a world where every penny counts, it makes sense to take advantage of every tool available to save on healthcare costs.

So here’s what you could to do:

Examine Your Health Plan: Determine if you have a High Deductible Health Plan (HDHP) that allows for a Health Savings Account (HSA) or if you qualify for a Flexible Spending Account (FSA) via your employer. Set up the suitable account through your employer or explore other administrators. I strongly suggest Fidelity Investments as an HSA administrator.
Calculate the Numbers: Familiarize yourself with the contribution limits and estimate your potential out-of-pocket expenses. If you expect to spend $1500 out of pocket, allocate that amount to the FSA account. If you're eligible for the HSA, consider maximizing it annually, as it rolls over each year and helps you save on yearly taxes.
Plan Ahead: Especially with FSAs, estimate your expenses carefully so you don’t over-contribute
Request LMN to unlock more benefits: FlexUp Wellness PLLC is just a click away to obtain a letter of medical necessity after a quick convenient health evaluation.

By following these measures, you're not only preventing financial waste—you're actively working towards a healthier and more financially savvy future. In a world where medical costs can quickly escalate, is it a crazy idea to pay less taxes?

Flexup Wellness, PLLC