HSA vs FSA vs HRA
As healthcare costs rise, it’s essential for both providers and clients to understand healthcare spending accounts. Clients are increasingly turning to tax-advantaged spending accounts to pay for medical and mental health services.
Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Arrangements (HRAs) all offer tax advantages. How they function, though, is very different.
Summary
- Healthcare spending accounts (HSAs, FSAs, HRAs) give clients tax-advantaged ways to pay for therapy, improving affordability and access to care.
- HSAs offer the most flexibility with individual ownership and unlimited rollover, making them ideal for long-term therapy needs.
- FSAs require careful planning due to the “use-it-or-lose-it” rule, often driving increased client visits at year-end.
- Accepting these payment types, and using an EHR for documentation and billing can streamline workflows and boost client retention.
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Let’s break down these three most common types of healthcare spending accounts so you know whether to accept them at your practice, how to process those payments, and the direct impacts they can have on your bottom line and client retention.
Overview of healthcare spending accounts
Healthcare spending accounts are tax-advantaged tools designed to help clients pay for out-of-pocket medical expenses.
- HSA (Health Savings Account): A personal, tax-advantaged savings account for individuals with a high-deductible health health plan (HDHP) to save for medical expenses by using pre-tax dollars.
- FSA (Flexible Spending Account): An employer-sponsored account that allows employees to set aside pre-tax funds for eligible healthcare expenses.
- HRA (Health Reimbursement Arrangement): An employer-funded benefit that reimburses employees for eligible out-of-pocket medical expenses and in some cases, personal health insurance premiums.
HSA (Health Savings Account)
HSAs are flexible, individually owned accounts that come with some strict requirements on eligibility.
Who qualifies for an HSA?
To open and contribute to an HSA, an individual must be enrolled in a High Deductible Health Plan (HDPD), cannot be enrolled in Medicare, and cannot be claimed as a dependent on someone else’s tax return.
The individual cannot have conflicting coverage such as a general-purpose FSA or HRA. Both the employer and employee can contribute to the account, though ultimately the funds belong to the employee.
Ownership and Rollover Benefits
One of the most unique and beneficial factors of HSAs is that the individual owns the account entirely, not the employer. The HSA stays with the individual even if they change jobs, switch health insurance plans, or retire.
Funds in an HSA do not expire. They roll over from one year to the next. This allows clients to build up a substantial tax-free reserve to cover healthcare expenses in the future, such as long-term therapy.
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FSA (Flexible Spending Account)
FSAs are commonly used, but require clients to take time for special consideration and planning due to expiration rules.
Employer-sponsored
FSAs are only available through employers. Employees can choose to have a specific amount of pre-tax money deducted from their paychecks to fund the account through the year. The employer may also elect to contribute in some cases.
Funds are available at the start of the plan year, allowing clients to use their FSA to pay for services such as therapy before their account has even been fully funded through payroll deductions.
Use-it-or-loose-it rule
The “use-it-or-lose-it” rule is one of the most crucial features of an FSA. Typically, any funds remaining in an FSA at the end of the plan year are forfeited back to the employer. For this reason, therapists may see an end-of-year surge in clients looking to use their remaining FSA dollars before the end of the plan year.
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HRA (Health Reimbursement Arrangement)
HRAs differ from HSAs and FSAs in that they entail a reimbursement system rather than a traditional savings account.
Employer-funded only
An HRA is entirely owned and funded by the employer. The employer sets a specific amount of tax-free funds that employees are eligible to use as reimbursement for qualified medical services. However, the employee cannot contribute their own money to an HRA.
Less flexibility
The employer owns the HRA, meaning they get to decide rules like which medical expenses are eligible for reimbursement (while following IRS guidelines), and whether unused funds can roll over to the next plan year.
Employees lose access to the HRA funds if they leave the job. The client typically pays out of pocket first for a service, then submits documentation to their employer to request reimbursement.
HSA vs. FSA vs. HRA comparison table
Feature | HSA (Health Savings Account) | FSA (Flexible Spending Account) | HRA (Health Reimbursement Arrangement) |
|---|---|---|---|
Ownership | Individual | Employer | Employer |
Rollover | Yes, unlimited | No ("use-it-or-lose-it") or limited | Employer-dependent (often does not roll over). |
Eligibility | Requires HDHP | Available if offered by the employer. | Available if offered by the employer. |
Best Use Cases | Long-term savings, portable funds, ongoing therapy needs | Predictable yearly costs | Employer-reimbursed out-of-pocket expenses |
How therapists accept these payments
It’s essential for therapists to understand how these accounts work when accepting client payments. Accepting HSA, FSA, and HRA funds can make your services more accessible to clients. Having the right administrative setup is key.
Documentation requirements
Regardless of the type, the IRS requires documentation that the expense a tax-advantaged account is being used for was a medically necessary service.
Receipts or documentation should include:
- Date of service
- CPT code, identifying the type of session and service (e.g., speech therapy, mental health counseling)
- Provider information (name, practice details, and tax ID or NPI)
- Client’s name
- Diagnostic code (ICD-10) proving medical necessity
- Cost of service
Payment processing in an EHR
Clients are often issued special debit cards that are tied directly to their HSA or FSA accounts. The easiest way for providers to accept and process these payments is through an Electronic Health Record (EHR) system like TheraPlatform.
Key features include:
- Superbills with itemized services for reimbursement
- Automated documentation and coding support
- Integrated payment processing (e.g., credit/debit, HSA/FSA cards)
EHRs can simplify the process of accepting tax-advantaged savings accounts by generating compliant documentation and tracking payments from HSA/FSA cards. The all-in-one platform allows therapists to manage the complete billing workflow in one place.
Tax advantaged savings accounts, including HSAs, FSAs, and HRAs, provide clients with valuable ways to pay for therapy services. Because each one has different rules surrounding eligibility, ownership, and flexibility, it’s critical to understand the details of how they work.
Understanding the differences between these accounts allows therapists to improve client access to care, reduce billing confusion, and ensure a smooth reimbursement process.
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How EHR and practice management software can save you time with insurance billing for therapists
EHRs with integrated billing software and clearing houses, such as TheraPlatform, offer therapists significant advantages in creating an efficient insurance billing process. The key is minimizing the amount of time dedicated to developing, sending, and tracking medical claims through features such as automation and batching.
Watch this video to see how TheraPlatform’s EHR saves time on insurance billing
What are automation and batching?
- Automation refers to setting up software to perform tasks with limited human interaction.
- Batching or performing administrative tasks in blocks of time at once allows you to perform a task from a single entry point with less clicking.
Which billing and medical claim tasks can be automated and batched through billing software?
- Invoices: Create multiple invoices for multiple clients with a click or two of a button or set up auto-invoice creation, and the software will automatically create invoices for you at the preferred time. You can even have the system automatically send invoices to your clients.
- Credit card processing: Charge multiple clients with a click of a button or set up auto credit card billing, and the billing software will automatically charge the card (easier than swiping!)
- Email payment reminders: Never manually send another reminder email for payment again, or skip this altogether by enabling auto credit card charges.
- Automated claim creation and submission: Batch multiple claims with one button click or turn auto claim creation and submission on.
- Live claim validation: The system reviews each claim to catch any human errors before submission, saving you time and reducing rejected claims.
- Automated payment posting: Streamline posting procedures for paid medical claims with ERA. When insurance offers ERA, all their payments will post automatically on TheraPlatform's EHR.
- Tracking: Track payment and profits, including aging invoices, overdue invoices, transactions, billed services, service providers
Utilizing billing software integrated with an EHR and practice management software can make storing and sharing billing and insurance easy and save providers time when it comes to insurance billing for therapists.
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Resources
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More resources
- Therapy resources and worksheets
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- Ultimate teletherapy ebook
- The Ultimate Insurance Billing Guide for Therapists
- The Ultimate Guide to Starting a Private Therapy Practice
- Insurance billing 101
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- Free mini video lessons to enhance your private practice
- 9 Admin tasks to automate in your private practice
References
Jun, J., Frogner, B. K., Carle, A. C., & Tubbs-Cooley, H. L. (2026). Preventive Care Utilization, Employer-Sponsored Benefits, and Influences on Utilization by Healthcare Occupational Groups. Workplace Health & Safety, 74(4), 189-198. https://doi.org/10.1177/21650799251408100
Li, B. (2024). Optimizing Healthcare Flexible Spending Account Contributions Using Inventory Management Theories: An Interdisciplinary Study. The Journal of Applied Business and Economics, 26(5), 28-40. https://www.proquest.com/docview/3133872129?fromopenview=true&pq-origsite=gscholar&sourcetype=Scholarly%20Journals
Perrault, E. K. (2025). How Well Do Employees Know Their Health Savings Accounts? The Need for Improved HSA Communication and Literacy. Compensation & Benefits Review, 57(2), 140-146. https://doi.org/10.1177/08863687241293552
FAQs about HSA vs FSA vs HRA
Can clients use HSA, FSA, or HRA funds for therapy?
Yes—therapy services are typically eligible if they are medically necessary and properly documented.
What documentation is required for reimbursement?
Clients need receipts or superbills that include service date, CPT/ICD-10 codes, provider details, and cost of service.
What’s the biggest difference between HSA, FSA, and HRA?
Ownership and flexibility: HSAs are individually owned with rollover, FSAs are employer-sponsored with expiration rules, and HRAs are employer-funded reimbursements.
