HSA, FSA, HRA: Why Employees Still Confuse Their Healthcare Accounts

Consumer accounts (HSAs, FSAs, and HRAs) have never been more important to employees’ financial wellbeing, and yet most employees still cannot reliably explain what they have or how to use it. Two recent data points capture the gap.

According to Devenir’s HSA Market Survey, health savings accounts (HSAs) held nearly $174 billion across 41.7 million accounts at the end of 2025, with investment assets climbing 33% year over year. That growth reflects a meaningful shift: HSAs are increasingly functioning as long-term savings vehicles, not just spending accounts.

At the same time, Businessolver’s 2026 Benefits Insights Report found that 85% of employees say they are confused about their benefits, even though 79% say they feel confident in the choices they make at enrollment. Only 38% correctly understand what an HSA is, and just 47% understand FSAs.

That gap between confidence and comprehension is where the financial damage happens. Employees forfeit dollars, delay care, take on debt, or simply fail to participate in the tax-advantaged accounts available to them. For brokers and employers, closing the gap is both a wellbeing imperative and a return-on-investment question.

The Consumer Accounts Employees Most Often Confuse

Part of the challenge is linguistic. “FSA” and “HSA” sound nearly identical, “HRA” gets folded into the same mental bucket, and “FSA” itself refers to two very different accounts. Employees may encounter four distinct arrangements at open enrollment, each governed by different federal rules:

1. Health Savings Account (HSA). A portable, individually owned bank account that pairs with a qualified high-deductible health plan (HDHP). Contributions, growth, and qualified withdrawals are all federally tax-advantaged. Funds roll over indefinitely and remain with the employee regardless of job changes.

2. Health Flexible Spending Account (Health FSA). An employer-sponsored, self-insured medical plan funded through pre-tax salary reduction and, in some cases, employer dollars. Employees use it to pay qualified medical expenses. By default, unused funds are forfeited at the end of the plan year, although the plan may permit a limited carryover or a grace period of up to 2½ months. A variant called a limited-purpose FSA (sometimes referred to as an HSA-compatible FSA) reimburses only dental, vision, and preventive care expenses, plus post-deductible medical expenses if the plan permits. This is the only FSA design that an HSA-eligible employee can use without losing HSA eligibility.

3. Dependent Care FSA. A separate account used for eligible childcare or adult-care expenses that allow the employee to work. Despite sharing the “FSA” label, it is governed by a different statute, has its own annual limit, and does not affect HSA eligibility.

4. Health Reimbursement Arrangement (HRA). An employer-funded, self-insured group health plan that reimburses qualified medical expenses. Employees do not contribute. Several HRA designs exist, including traditional integrated HRAs, excepted benefit HRAs (EBHRAs), individual coverage HRAs (ICHRAs), and qualified small employer HRAs (QSEHRAs), each with its own rules around eligibility, contribution limits, and coordination with other coverage.

The vocabulary alone explains a great deal of the confusion. “FSA” actually refers to two different account types, and “HRA” can mean any of several arrangements with materially different mechanics.

Five Reasons Confusion Persists

Understanding why employees get tripped up is the first step toward fixing it. A few patterns emerge consistently.

1. The ownership question

HSAs are individually owned and portable; the money belongs to the employee even after they leave. Health FSAs and HRAs are employer-sponsored plans, and unused balances are generally not portable. Employees often assume all three work the same way.

2. The expiration question

HSA balances roll over indefinitely. Health FSAs default to “use it or lose it,” though plans may permit a carryover of up to $680 (for plan years beginning in 2026) or a grace period of up to 2½ months, but not both. HRA carryover is governed entirely by plan design. Because “use it or lose it” is the rule most employees remember, they often apply that label to every account that sounds adjacent, including ones where the money is actually theirs to keep.

3. The eligibility question

HSA eligibility is narrow. An employee must be enrolled in a qualified HDHP, must not have impermissible coverage (such as a general-purpose health FSA, a spouse’s general-purpose FSA, or any part of Medicare), and must not be claimed as someone else’s tax dependent. Eligibility is tested on the first day of each calendar month. Health FSAs and HRAs have no HDHP requirement. Employees who enroll in both an HSA and a general-purpose health FSA, or whose spouse has one, may not realize they have just disqualified themselves from making HSA contributions. A limited-purpose FSA is the available workaround, but only if the employer’s plan offers it.

4. The “two FSAs” problem

Many employees do not recognize that a health FSA and a dependent care FSA are separate accounts with separate rules and separate annual limits. Both appear under the same general heading at open enrollment, which reinforces the confusion.

5. The same account behaves differently at different employers

Most employees have worked at more than one employer over their career, and account-based health benefits do not behave consistently across those employers. A Health FSA at one employer may permit a $680 carryover; at another, the same plan year ends in forfeiture. One employer’s HRA may reimburse premiums; another’s may not. Even within a single employer, plan design can shift from one year to the next as carryover policies, contribution levels, or HRA designs change. Employees who built their mental model at a prior employer often apply the wrong rule to their current situation, and the resulting confusion looks like account confusion when it is actually plan-design confusion.

What Brokers and Employers Can Do

Closing the literacy gap does not require a wholesale overhaul of communications. It does require deliberate sequencing, the right framing, and a willingness to repeat the basics more often than feels comfortable.

Lead with what the account is, not what it costs

Employees disengage from communications that open with limits and deadlines. They lean in when the message starts with ownership, control, and tax advantage. Establish what the account is, and who keeps the money, before discussing election amounts.

Separate the buckets visually

A side-by-side framework that distinguishes HSA, Health FSA, Dependent Care FSA, and HRA by a few core questions (Who owns it? Who funds it? What happens to unused money? Does it move with me?) clarifies more than a comprehensive features list. See our employee handout, Your Consumer Accounts: HSAs, FSAs, and HRAs at a glance.

Address the “two FSAs” issue head-on

If the plan offers a health FSA and a dependent care FSA, communicate them as separate decisions with separate consequences. Employees commonly confuse the two limits and the two purposes, and a single sentence at enrollment is rarely enough.

Communicate around life events, not just open enrollment

HSA eligibility can shift mid-year when an employee enrolls in Medicare, gains coverage through a spouse, changes from family to single HDHP coverage, or has a baby. Communications that reach employees at those moments tend to land more effectively than annual materials alone.

Make repetition the strategy, not the fallback

Complex regulatory frameworks become familiar through exposure, not through one-time saturation. Quarterly nudges, role-based examples, and short refreshers across the plan year tend to outperform a single comprehensive guide delivered at open enrollment. The goal is not to make every employee a benefits expert; it is to make sure that when an employee has a question, they recognize that the answer exists and know where to find it.

Build plan-design clarity into the communication

When an employer changes carryover policies, adjusts HRA contribution amounts, or modifies eligibility rules, the change itself needs a communication moment. Employees rarely re-read their SPDs; they rely on what they remember from prior years. A short, dated callout that says “this is what changed and this is what stayed the same” prevents a year of confused claims and election-change requests.

Centralize the administrative pieces where the platform supports it

Even when a single vendor administers HSA, FSA, and HRA accounts (which is typical), the benefits administration platform usually sits separately. Employees handle enrollment and life events in one place and check account balances or claims in another, sometimes with different logins and different communications cadences. That separation reinforces the perception that all of these accounts work the same way, when each is actually governed by different federal rules.

While the consumer accounts administrator continues to handle account custody and claims processing, certain administrative elements can be managed within the benefits administration platform itself: enrollment elections, contribution amounts, and eligibility tracking across all four account types, plus COBRA administration for HRAs and Health FSAs. Centralizing those elements reduces cognitive load on the employee (one election experience, one place to check what they elected) and reduces friction for the HR team (consistent records of who is enrolled in what). It also closes the small administrative gaps that become employee confusion later: a missed COBRA notice for an HRA, an HSA contribution processed against an outdated election, or eligibility data that disagrees between systems.

Download our companion guide for employees: Your Consumer Accounts: HSAs, FSAs, and HRAs at a glance

Provide a take-home resource employees will actually read

A plain-language, scannable handout that employees can return to between open enrollment and tax season fills a gap that lengthy SPDs and benefits portals do not address. The companion piece to this post is one example of how to structure that resource.

A Note for Brokers

Employer clients often surface benefits-literacy concerns indirectly, as elevated HR ticket volume, mid-year election change requests, or claim disputes. A few practical observations from the patterns above for broker conversations about consumer accounts:

• Use the confusion patterns as a diagnostic. When an employer reports that “employees don’t understand their FSA,” the patterns above suggest specific places to look first: a recent plan-design change, a Dependent Care FSA presented alongside a Health FSA without distinction, or an HDHP introduced without sufficient HSA context. Naming the pattern usually clarifies the fix.

• Position plan-design conversations at renewal. Carryover and grace-period choices, HRA structures, and HDHP contribution timing all drive employee comprehension throughout the plan year. Renewal is the natural moment to weigh whether the current design is producing the outcomes the employer wants, before it becomes a mid-year issue.

• Leverage existing resources rather than building new ones. Vetted compliance publications and ready-to-share employee pieces, including the companion to this post, are designed to be used as-is. Pointing employer clients toward accurate, pre-built materials is usually more efficient than producing parallel content.

The Bottom Line

The HSA market has crossed $174 billion in assets, and consumer accounts will continue to expand as a category. But adoption without comprehension produces poor outcomes for employees and incomplete returns for the employers funding these programs. Brokers and employers who treat benefits literacy as an ongoing discipline, rather than a once-a-year campaign, are best positioned to close the gap.