As the Trump administration’s return draws closer, Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) could gain renewed attention for brands and retailers looking to grow. During Trump’s 2016 administration, the group supported policies to increase contribution limits and expand access to these accounts, aiming to ease healthcare expenses for consumers. While several of these policies did not pass the Senate, they represent a policy shift towards consumer-driven healthcare. If similar legislative initiatives emerge again, wider adoption and usage of HSAs and FSAs could occur, impacting consumer spending.
For brands and retailers, keeping an eye on these developments is crucial, as HSAs and FSAs play a growing role in how consumers manage healthcare costs trickling down to consumer goods and general merchandise. Numerator conducted research on over 2,000 HSA and FSA holders to understand who uses them, the scale of spending they support, which consumers purchase with these funds, and ways for brands and retailers to engage this potentially expanding market.
What are Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)?
Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are tax-advantaged tools designed to help consumers manage healthcare costs when insurance is unable to cover. Each offers distinct benefits and limitations. HSAs are tied to high-deductible health plans and allow unused funds to roll over indefinitely. These accounts can even grow through investments, making them a compelling long-term savings option.
FSAs, by contrast, provide more immediate access and are widely available, though they come with a “use-it-or-lose-it” policy. Unless certain provisions apply, such as limited carryovers or grace periods, consumers must spend their FSA funds within the calendar year or risk losing them.
Funds from HSAs and FSAs can be used across a variety of consumer goods. Eligible expenses include over-the-counter medications like allergy relief and cold treatments, first aid supplies such as bandages and antiseptics, medical devices like glucose monitors and thermometers, and vision care products. Other categories range from maternity and baby products to skincare and COVID-19 supplies, such as face masks and hand sanitizers.
Who uses HSAs and FSAs?
Numerator estimates around 37% of Americans report having either an HSA or an FSA. These account holders largely mirror the U.S. workforce skewing towards millennial college graduates with children. Nearly half (49%) fall into the top third of purchasing power, with income adjusted for cost of living and household size. HSA and FSA holders are also 33% more likely than non-account holders to have children.
These individuals often work in fields such as IT services, accounting, and administrative roles. They are also 35% more likely to prioritize financial planning for the future compared to those without these accounts. In terms of health, there are notable trends. HSA and FSA holders are more likely to report conditions such as gluten intolerance, attention deficit disorder, and eczema, but they are less likely to face issues like arthritis, osteoporosis, or heart disease.
How much spending happens with HSAs and FSAs?
American households are collectively placing over $100 billion in estimated spending through contributions to Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), showcasing the growing importance of these tax-advantaged tools in healthcare and ultimately, consumer spending.
Numerator’s research uncovered that households contribute an average of $3,030 per year to HSAs, with $2,420 coming from personal funds and $610 from employers. Family accounts represent the majority, comprising 57% of HSAs, while individual accounts make up 43%. Importantly, these accounts are actively used—by November 2024, 54% of HSA contributions are projected to be spent, amounting to $47 billion in economic activity.
FSAs, though slightly smaller in scale, show similar patterns. The average household contribution is $2,250 annually, with $1,820 coming from personal funds and $430 from employers. Family accounts again dominate at 59%. Spending occurs at a quicker pace for FSAs, with 77% of contributions expected to be used by early November 2024. This translates to an estimated $36 billion in annual spending tied to FSAs.
Spending habits differ between account types. Over half (54%) of FSA holders determine their contributions based on anticipated healthcare costs for the year, compared to just 32% of HSA holders. Employer contributions also influence decisions more heavily for HSA users—32% consider employer contributions when deciding how much to add, compared to 19% of FSA holders. The reason is that HSA holders are nearly 75% more likely to have their employers contribute to their accounts.
What are HSA and FSA funds used for?
Usage patterns reveal key differences between HSAs and FSAs. For HSAs, medical services and procedures account for the largest share of spending (62%), while FSAs are most often used for dental and vision care (67%). However, fewer consumers use these accounts to purchase medical products for home use—only 27% of HSA holders and 36% of FSA holders spend in this category.
This difference is partly due to a lack of awareness. Presenting respondents with a list of 19 eligible consumer product categories, Numerator found that respondents identified only eight on average as qualifying for HSA/FSA spending.
Despite limited awareness, spending on consumer goods is still significant. Numerator estimates that a combined $16 billion—$8.5 billion from HSAs and $7.5 billion from FSAs—is spent annually on consumer products. Although total FSA spending is lower, consumer goods purchases from FSAs rival those from HSAs. This is largely because FSA holders are more likely to use their funds for consumer products and spend a greater proportion of their contributions on medical items for home use (45% of annual contribution vs. 37% for HSA holders).
Popular categories for HSA and FSA spending include over-the-counter (OTC) medications, first aid supplies, feminine hygiene products, digestive health items, and sun protection products.
How can brands and retailers leverage HSAs and FSAs to grow?
Education is imperative for brands and retailers looking to leverage HSAs and FSAs for growth. Currently, 25% of HSA/FSA holders say they find it challenging to determine eligibility when shopping in-store. By improving signage and clearly labeling HSA/FSA-eligible products, brands and retailers can help consumers realize when they should be using their funds. Fostering relationships with drug retailers like CVS, RiteAid and Walgreens are especially valuable, as 73% of HSA/FSA holders prefer shopping at these stores for eligible items.
Retailers can also address barriers to usage at checkout. While over half of consumers prefer using HSA/FSA debit cards, some forget their cards or are unaware of their funds. Integrating HSA/FSA payment options into mobile wallets like Apple Pay or Google Pay and providing reminders during checkout can help increase usage.
Brands should also consider how access to these tax-advantaged tools adjusts brand preferences. Based on Numerator’s purchasing data, HSA and FSA holders are more likely to favor branded products over private labels when purchasing health products overall. Brands should pay particular attention to lower-income consumers, who are twice as likely as middle- and higher-income individuals to choose branded options when using these funds (24% vs. 12% and 10%, respectively).
Policies aiming at consumer-driven healthcare are likely to gain traction in the next four years with HSAs and FSAs set to play a stronger role in shaping spending for the consumer goods industry. By educating consumers and tailoring strategies to their needs, brands and retailers can capitalize on this growing market.
Numerator is a data and tech company reinventing market research with first-party, consumer-sourced data for leading health brands and retailers. Partner with Numerator to shape your strategy today.
