A Health Equity Account is not a cousin of the HSA or FSA. It is a pool of money run by an employer, government agency, or nonprofit that pays for non-medical barriers to care, such as rides to appointments, short-term housing, or groceries, for people who face economic or social obstacles to staying healthy. An HSA or FSA, by contrast, is an individually owned, tax-advantaged account you use to pay your own qualified medical bills. So the comparison most people reach for when weighing a Health Equity Account vs. an HSA or FSA is really a comparison between a targeted assistance program and a personal spending account; they share the word “health” and almost nothing else.
What a Health Equity Account Is
An HEA is a programmatic funding structure, not a bank account. The administering organization holds the money and spends it on services that remove practical obstacles to care for a defined population. Eligibility turns on need: income relative to the Federal Poverty Level, housing stability, food security, access to transportation.
What that money typically pays for falls outside anything the IRS treats as a medical expense under Section 213(d) of the Internal Revenue Code, which limits deductible medical costs to things like diagnosis, treatment, prevention, and medically necessary transportation.1Office of the Law Revision Counsel. 26 U.S. Code 213 – Medical, Dental, Etc., Expenses Common HEA-funded supports include:
- Non-emergency rides to and from medical appointments.
- Short-term or transitional housing during treatment or recovery.
- Medically tailored meals and nutrition programs for people managing chronic conditions.
- Utility bill assistance to keep a home safe and habitable.
- Job training and employment support that addresses economic drivers of poor health.
None of these are reimbursable through an HSA or FSA. That gap is the reason HEAs exist.
What HSAs and FSAs Are
A Health Savings Account is a personal account you open if you are enrolled in a high-deductible health plan and not entitled to Medicare benefits.2Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts For 2026, an HDHP must carry a minimum annual deductible of $1,700 for self-only coverage or $3,400 for family coverage, and the HSA contribution cap is $4,400 self-only or $8,750 for a family.3Internal Revenue Service. Rev. Proc. 2025-19
A Flexible Spending Account is offered through an employer’s cafeteria plan under Section 125 of the Internal Revenue Code and is open to participating employees without regard to income or need.4Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans FSA funds generally must be used within the plan year, though some plans allow a carryover of up to $680. The 2026 FSA contribution cap is $3,400.
Both accounts limit spending to qualified medical expenses: deductibles, copayments, prescription drugs, and similar clinical costs defined by Section 213(d).1Office of the Law Revision Counsel. 26 U.S. Code 213 – Medical, Dental, Etc., Expenses Rent, groceries, and utility bills are not on that list.
Ownership, Contributions, and Tax Treatment
The structural differences are where the three diverge most sharply.
Who Owns the Money
An HSA belongs to you. The balance follows you when you change jobs or retire, rolls over indefinitely, and can be invested. An FSA is tied to your employer’s plan and generally resets each plan year under the use-it-or-lose-it rule. HEA funds are not yours at all. The administering organization owns the money and spends it on your behalf, usually by paying a service provider directly or issuing a voucher. You cannot cash out an HEA balance, invest it, or take it with you.
Who Puts Money In
HSA and FSA contributions come from you (and sometimes your employer) up to the annual federal cap. There is no individual contribution limit on an HEA because individuals are not contributing. HEA funding comes from the sponsoring organization, which may draw on government dollars, employer or health system investment, or philanthropic grants.
Tax Treatment
HSAs carry a triple tax benefit: contributions are deductible or made pre-tax through payroll, the balance grows tax-free, and withdrawals for qualified medical expenses are untaxed.2Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts FSAs use pre-tax salary reductions to lower your taxable income.5Office of the Law Revision Counsel. 26 U.S. Code 125 – Cafeteria Plans
HEAs give you none of those individual tax advantages because you are not contributing or holding a balance. Benefits received through a government-administered HEA are generally excludable from your gross income under the general welfare exclusion, which covers payments made from a governmental welfare fund based on need rather than as compensation for services.6Internal Revenue Service. ITG FAQ 6 Answer – What Is the General Welfare Doctrine? If an HEA distributes unrestricted cash rather than payment for a specific qualifying purpose, that payment could be treated as taxable income.
How You Actually Access HEA Help
You do not shop for an HEA the way you shop for an HSA custodian. There is no standardized HEA product and no single federal statute defining one. Programs vary widely in structure, funding level, eligibility rules, and available services depending on who runs them and where you live.
Most HEAs work as direct-support systems rather than reimbursement accounts. Instead of paying out of pocket and filing a claim, you are screened for eligibility by the administrator or a partner organization, and if you qualify, the program pays a community partner (a food bank, a non-emergency medical transportation provider, a transitional housing program) or issues a voucher for a specific need. You generally never handle the money.
What to Watch Out For
Three limitations are worth knowing before you count on an HEA as part of a care plan.
Federal funding is unsettled. In March 2025, the Trump administration rescinded prior CMS guidance on using Section 1115 Medicaid demonstration waivers to address health-related social needs. Existing approved waivers were not automatically cancelled, but CMS said it would evaluate new requests case by case rather than under a standardized framework. An executive order also prohibited federal support for “housing first” programs.7Health Affairs. Addressing Health-Related Social Needs Through Medicaid Section 1115 Waivers: Challenges And Opportunities Programs that lean on Medicaid matching dollars are the most exposed. States retain a narrower alternative under managed care rules, which allow plans to cover “in lieu of services and settings” that address needs like housing instability or nutrition insecurity without a full waiver.8Centers for Medicare & Medicaid Services. In Lieu of Services and Settings
HEAs are not entitlements. Even if you meet every eligibility criterion, funding is finite and allocated on a first-come or priority basis. Smaller programs can and do run out of money mid-year. If HEA-funded transportation or housing is part of your treatment plan, keep a backup arrangement in mind.
The data you hand over is sensitive. Eligibility screening collects information about income, housing, food security, and employment, tied to you by name. When that social determinants data sits alongside medical information in a clinical record, it is generally treated as protected health information under HIPAA, but community-based organizations that are not healthcare providers or insurers may fall outside HIPAA entirely. For non-HIPAA entities, the FTC’s Health Breach Notification Rule requires notice to affected individuals, the FTC, and sometimes the media after a breach, with penalties that can reach $51,744 per violation.9Federal Trade Commission. Health Breach Notification Rule: The Basics for Business Ask any program you enroll in how your information is stored, who sees it, and what happens if it is exposed.