A Health Equity Account, an HSA, and an FSA share the word “health” and little else. A Health Equity Account is a pool of money an employer, government agency, or nonprofit uses to pay for the non-medical barriers that keep vulnerable people from getting care: rides to appointments, short-term housing, groceries, utility bills. A Health Savings Account and a Flexible Spending Account are tax-advantaged personal accounts you use to pay your own qualified medical expenses. One is a targeted subsidy program run by an organization; the other two are savings tools you own or elect into through work.
What a Health Equity Account Is
An HEA is not something you open at a bank. It is a programmatic funding structure that channels money toward people whose health outcomes suffer because of poverty, housing instability, food insecurity, or similar social factors. Eligibility turns on need rather than on insurance status or employment: administrators screen for income relative to the Federal Poverty Level, housing stability, food security, and access to transportation.
The expenses an HEA covers are the ones health insurance and tax-advantaged medical accounts do not. Common categories include:
- Non-emergency transportation to and from medical appointments
- Short-term or transitional housing during treatment or recovery
- Medically supportive food and nutrition programs for conditions like diabetes or heart disease
- Utility bill assistance to keep living conditions safe
- Job training and employment support that address the economic roots of poor health
None of these qualify as deductible medical expenses under Section 213(d) of the Internal Revenue Code, which limits medical costs to diagnosis, treatment, prevention, and medically necessary transportation.1Office of the Law Revision Counsel. 26 U.S. Code 213 – Medical, Dental, Etc., Expenses That is the whole point of an HEA: it exists to fill the gap the tax code and standard insurance leave open.
Who Owns the Money
An HSA belongs to you. The balance carries over indefinitely, you keep it when you change jobs or retire, and you can invest it.2Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts An FSA is elected through your employer’s cafeteria plan under Section 125 of the Internal Revenue Code; the funds are yours to spend during the plan year but generally must be used or forfeited, though some plans allow a carryover of up to $680.3Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
HEA funds are not yours. The money belongs to the administering organization and is distributed as a subsidy or direct payment tied to a specific service. You cannot withdraw HEA money as cash, invest it, or take it with you if you leave the program. There is no individual contribution limit because you are not contributing.
Who Qualifies
To fund an HSA, you must be enrolled in a high-deductible health plan and cannot be entitled to Medicare.2Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts For 2026, the HDHP minimum annual deductible is $1,700 for self-only coverage or $3,400 for family coverage.4Internal Revenue Service. Rev. Proc. 2025-19 An FSA is available to employees whose employer offers one, regardless of income.
HEA eligibility works from the other direction. Insurance status and employment are largely beside the point. What matters is whether you face documented social or economic barriers to care. Two people with the same insurance can have very different HEA eligibility depending on their housing, income, and food security.
What the Money Can Pay For
HSA and FSA dollars are limited to qualified medical expenses: deductibles, copayments, prescriptions, and other costs that fit the IRS definition of medical care.1Office of the Law Revision Counsel. 26 U.S. Code 213 – Medical, Dental, Etc., Expenses Rent, groceries, and utility bills do not qualify, no matter how directly they affect a person’s health.
HEA funds cover exactly those non-clinical costs. A patient managing uncontrolled diabetes might receive a month of medically tailored meals through an HEA-funded contract with a local food organization. A patient recovering from surgery might get short-term housing so they are not discharged to the street. The service is the point; the account is only the plumbing that pays for it.
Contribution Limits
For 2026, the HSA annual contribution cap is $4,400 for self-only coverage and $8,750 for family coverage.4Internal Revenue Service. Rev. Proc. 2025-19 The 2026 FSA cap is $3,400. HEAs have no individual contribution limit because there is no individual account to fund. Program budgets are set by the sponsoring organization and its funders.
Tax Treatment
HSAs carry a well-known triple tax benefit: contributions are deductible or made pre-tax through payroll, the balance grows tax-free, and withdrawals for qualified medical expenses are not taxed.2Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts FSAs use pre-tax salary reductions, lowering your taxable income for the year.5Office of the Law Revision Counsel. 26 U.S. Code 125 – Cafeteria Plans
HEAs offer none of these individual tax advantages, because the recipient is not making contributions or holding a balance. On the recipient’s side, benefits received from a government-administered HEA are generally excludable from gross income under the general welfare exclusion, which applies to governmental payments made from a welfare fund based on need rather than as compensation for services.6Internal Revenue Service. ITG FAQ 6 Answer – What Is the General Welfare Doctrine? For employer-funded HEA programs, the organization may deduct its contributions as a business expense or as a charitable contribution depending on how the program is structured. One caution: if HEA funds are distributed as unrestricted cash rather than for a specific qualifying purpose, the payment could be treated as taxable income to the recipient.
How HEA Money Actually Reaches People
HSAs and FSAs work through reimbursement or debit card at the point of sale. HEAs typically do not. The administering organization pays a service provider directly, or issues a voucher for a specific need. A common model uses contracts with community-based organizations: a food bank, a non-emergency medical transportation provider, a transitional housing program. The HEA pays the organization; the patient receives the service without handling money.
Some programs use a third-party administrator that screens individuals for eligibility and then allocates funds toward approved services. Administrators track health outcome data and social impact metrics to show funders that spending $200 on a month of medically tailored meals costs less than one emergency room visit for a diabetic crisis.
Where the Funding Comes From
HEA money comes from a mix of government, corporate, and philanthropic sources. On the government side, Section 1115 Medicaid demonstration waivers have been the primary mechanism. Federal law lets the Secretary of Health and Human Services waive standard Medicaid rules for experimental projects that promote the program’s objectives, allowing federal matching funds to cover services regular Medicaid would not.7Office of the Law Revision Counsel. 42 U.S. Code 1315 – Demonstration Projects Before 2025, states used this authority to fund supportive housing, nutrition assistance, employment support, and medical respite care for Medicaid beneficiaries.
That framework has shifted. In March 2025, the Trump administration rescinded prior CMS guidance on using 1115 waivers to address health-related social needs. Existing approved waivers were not automatically cancelled, but CMS indicated it would evaluate new requests case by case rather than under a standardized framework.8Health Affairs. Addressing Health-Related Social Needs Through Medicaid Section 1115 Waivers: Challenges And Opportunities A separate pathway remains: under managed care rules, states can authorize “in lieu of services and settings,” letting managed care plans cover substitute services that address needs like housing instability and nutrition insecurity without a full 1115 waiver.9Centers for Medicare & Medicaid Services. In Lieu of Services and Settings Corporate contributions through ESG initiatives and philanthropic grants round out the mix.
Practical Limits Before You Count on One
There is no standardized HEA product you can shop for. HSAs are governed by a single federal statute and available through any qualifying financial institution; HEAs vary widely in structure, funding level, eligibility rules, and available services depending on who runs the program and where you live.
Federal funding is uncertain. The 2025 rescission of CMS guidance on 1115 social needs waivers has left many state-level programs in limbo, and programs that depend on Medicaid matching funds face the most exposure to further policy shifts.
HEAs are not entitlements. Even if you meet every eligibility criterion, funding is finite and allocated on a first-come or priority basis. Running out of money mid-year is a real possibility for smaller programs. If HEA-funded transportation or housing is part of a treatment plan, keep a backup arrangement in mind.