Why Americans Are Turning to FSAs and HSAs for Healthcare Savings

More Americans are using pretax savings accounts to cover everyday healthcare costs. Flexible spending accounts (FSAs) and health savings accounts (HSAs) let workers set aside money before taxes for medical expenses. These accounts have grown in popularity, especially among white-collar employees with steady incomes and education backgrounds. FSAs and HSAs serve different needs but share the same goal: cutting healthcare costs. An FSA is employer-controlled, with lower contribution limits and strict rules on carrying over unused funds. In contrast, an HSA pairs with a high-deductible health plan, allows higher contributions, and lets savings roll over year after year.

Many account holders struggle to use all their funds before deadlines. By November 2024, 77% of FSA money had already been spent, yet billions were still expected to go unused by year's end. A 2024 report found that half of FSA users forfeited an average of $441 in 2022, returning the cash to their employers. The accounts cover a wide range of products beyond prescriptions. Eligible purchases include menstrual care items, sunscreen, hand sanitiser, and acne treatments. The U.S. market for acne products alone is set to rise from $5 billion in 2023 to $7 billion by 2030. Meanwhile, sun protection sales hit around $2 billion in 2025. Most FSA and HSA users fall into the white-collar working class. They tend to be educated professionals, often from Gen Z to Gen X, with stable, higher-paying jobs. Employers offer these accounts as a way to ease healthcare expenses for their staff.

Pretax savings accounts help workers manage medical costs, but unused funds remain a common issue. With markets for eligible products like acne treatments and sunscreen expanding, more employees may take advantage of these benefits. Still, many will need to plan spending carefully to avoid losing money at year's end.