Understanding Employee Spending Trends with HSAs and FSAs
Healthy employees perform better at work and enjoy a better quality of life at home. Health savings accounts (HSAs) and flexible spending accounts (FSAs) are benefits that allow employees to set aside money on a pre-tax basis to pay for qualified medical expenses. These accounts can lower an employee’s overall health expenses by using the untaxed dollars for prescription co-pays, eyeglasses, and other healthcare out-of-pocket costs. As an employer, you can help your employees pay for the care they need while gaining tax advantages for your company.
A good understanding of employee trends can help employers better communicate the value of these benefit accounts and bolster participation rates. During open enrollment season, employers can encourage new sign-ups for FSAs and HSAs by educating employees on the use and benefits of these tax-advantaged accounts. Understanding these four employee account-spending trends can help you tailor your HSA and FSA messaging strategies.
1. Monthly FSA spending is almost double the monthly HSA spending
Employers can only allow a limited amount of carryover for medical FSA funds ($660 for 2025 plans and $680 for 2026 plans), offering incentives for FSA participants to spend all of their year’s FSA funds. In contrast, HSA funds can be carried over from year to year and used as an investment tool. Knowing they need to "use it or lose it"; FSA participants are inclined to spend the funds on eligible expenses throughout the year, while HSA participants tend to hold on to their funds.
2. FSA spending is highest during the fourth quarter
Because there are strict limits on FSA carryover amounts, employees risk losing unspent funds. It’s why FSA spending increases during the last quarter of the year. In December, spending rises to more than 9.5% of overall funds. In fact, it's common to see healthcare marketing efforts that target FSA participants in the fourth quarter to encourage them to spend any remaining funds and avoid losses.
3. HSA spending peaks early in the year
In contrast to FSA funds, which see peak spending during the later part of the year, employees tend to spend more of their HSA funds in the first quarter. Many employers contribute to employee accounts early in the year, making early spending an attractive option. February represents 10% of all HSA spending, a sharp contrast from FSA spending trends.
4. September and December see HSA spending hikes
School-related expenses, like eye exams, vaccinations, and school physicals, are all HSA-eligible, causing HSA spending to increase in September. The rise we see in December is likely due to confusion between carryover rules for HSA and FSA funds. Reminding employees that all HSA funds carry over from year to year is important. Another possible reason for the rise in December could be due to deductibles being met and taking advantage of that in order to squeeze in last minute medical appointments that would otherwise need to be paid for.
Well-informed employees make good decisions
When employees make the most of dedicated accounts for medical spending, saving, and investing, they can make financial decisions that promote healthier and happier lifestyles.
First American Bank offers employers and their employees a variety of consumer-directed health benefit accounts. We’re proud to be recognized for the third year in a row by Investor’s Business Daily for providing one of the best HSA accounts for 2025. By partnering with First American Bank, you can be confident your employees have the highest quality terms on their health benefit accounts while providing employee satisfaction and tax advantages for your business.
