A Guide to HSAs/FSAs for Your Digital Health Product/Service
Cameron Jacox is the founder of Rocket Digital Health, the foremost digital health scale consultancy. Go-to-market is hard in healthcare, and we believe that you don’t need to reinvent the wheel to bring your brilliant invention to market. Having helped scale 13 digital health startups, including for 4 years as Chief Growth Officer at Lark Health from Series A to Unicorn status, Cameron & his team work with select startups to bring growth strategy to bear to beat their growth goals and catch their stride.
Can customers pay with an HSA/FSA? That is the question. HSA/FSA payment options are a valuable tool for digital health business owners and their customers. In this article, we will provide an overview of HSA/FSA eligibility and contribution limits, along with the products and services that can be purchased with these accounts. We will also discuss documentation requirements, products that are not eligible for payment, and whether HSA/FSA rules vary by plan and employer or are government regulations. Additionally, we will examine peer-reviewed studies to provide evidence for the benefits of HSA/FSA payment options for digital health businesses.
HSA/FSA 101 for Digital Health
As a digital health business owner, you may be interested in offering HSA/FSA payment options to your customers. HSAs and FSAs are tax-advantaged accounts that allow individuals to set aside pre-tax dollars to pay for eligible health expenses. HSAs are available to those with high-deductible health plans, while FSAs are typically offered as an employer benefit.
Offering HSA/FSA payment options can increase customer satisfaction and loyalty, as well as provide tax benefits for both the customer and the business. However, it's important to understand the rules and regulations surrounding these accounts.
What Products Can HSAs/FSAs Be Used For?
This is just a few examples of digital health products and services that can be purchased with HSA/FSA funds:
Telemedicine services and consultations
Health and wellness apps
Wearable health technology devices, such as fitness trackers or smartwatches
Medical software and hardware devices
Prescription medications
Doctor and specialist visits
Medical equipment, such as crutches or wheelchairs
Over-the-counter medications, such as pain relievers and allergy medicine
Eye exams and glasses or contacts
Dental work, such as cleanings, fillings, and braces
Do I Have to Provide Documentation for Customers to Submit for Their HSA/FSA?
In short, documentation requirements for HSA/FSA payments vary by plan and employer. However, it's generally recommended that customers keep receipts and other documentation to prove that the expenses were eligible for payment. Some plans may require additional documentation, such as itemized receipts or letters of medical necessity
Do you have to provide documentation for customers to submit for their Health Savings Account (HSA) or Flexible Spending Account (FSA) reimbursement? While it is not legally mandated for providers to supply documentation, doing so can enhance customer experience by streamlining the reimbursement process.
IRS Guidelines
The Internal Revenue Service (IRS) regulates the use of HSAs and FSAs in the United States, setting rules and guidelines for eligible expenses and documentation requirements. According to IRS guidelines, customers must keep records of their HSA and FSA expenses to prove that the funds were used for eligible medical expenses. However, the IRS does not require providers to supply this documentation (IRS, 2021). https://www.irs.gov/publications/p969
Types of Documentation
Customers may need different types of documentation to submit claims for HSA or FSA reimbursement. Some common documents include:
a. Receipts: Customers need an itemized receipt or invoice that clearly lists the product or service provided, the date, and the amount charged. This is the most common.
b. Explanation of Benefits (EOB): For services covered by insurance, customers may need an EOB from their insurance company, which shows the amount that was not covered by insurance and is eligible for reimbursement.
c. Prescription: For over-the-counter (OTC) medications, customers may need a prescription from their healthcare provider to prove that the medication is a qualified medical expense (Optum Bank, 2021). https://www.optumbank.com/resources/library/eligible-expenses.html
Streamlining the Reimbursement Process
By providing documentation, you can help your customers easily submit their claims for HSA or FSA reimbursement. Having the necessary documents readily available can reduce the likelihood of claim denials or additional requests for information from the customer's HSA or FSA administrator. This can lead to a smoother experience for customers and may encourage them to return for future purchases or services (Forbes, 2018). https://www.forbes.com/sites/robertberger/2018/07/25/how-to-maximize-the-benefits-of-your-health-savings-account/?sh=721df7ed3026
It Improves Your Customer Experience
Providing documentation for HSA or FSA claims demonstrates a commitment to customer service and can help build trust and loyalty. By making the process more convenient for customers, you can differentiate your business from competitors that may not provide the same level of support. Additionally, customers who successfully claim reimbursements for your products or services may be more likely to recommend your business to others (HSA Store, 2021).https://hsastore.com/learn-eligible-expenses.html
What Are Some Health Products That HSAs/FSAs Cannot Be Used For?
While HSAs and FSAs can be used for a wide range of health-related expenses, there are some items that are not eligible for payment. These include:
Non-prescription medications, such as vitamins or supplements (unless prescribed by a doctor)
Cosmetic surgery or procedures
Health club memberships or fitness equipment
Childcare expenses
Veterinary expenses for pets
Do HSA/FSA Rules Vary by Plan and Employer or Are They Government Regulations?
The short answer is yes, HSA/FSA rules vary by plan and employer. While there are federal regulations in place, employers and plans may have their own rules and restrictions. The long answer is more complicated:
Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are both types of tax-advantaged accounts that can help individuals save money on healthcare expenses. HSAs and FSAs have certain rules and guidelines set by the federal government, but they can also vary depending on the specific plan and employer. In this answer, we will expand on the differences in rules and regulations and provide five references to support the information provided.
IRS Guidelines
Both HSAs and FSAs are governed by the Internal Revenue Service (IRS) in the United States, which sets general rules and regulations for these accounts. The IRS provides guidelines on contribution limits, eligible expenses, and tax treatment of these accounts. Some of these guidelines are updated annually, such as the contribution limits (IRS, 2021).
Reference: Internal Revenue Service. (2021). Health Savings Accounts and Other Tax-Favored Health Plans. https://www.irs.gov/publications/p969
HSA Eligibility Requirements
HSAs are only available to individuals who are enrolled in a qualified high-deductible health plan (HDHP). The specific requirements for an HDHP are also determined by the IRS. Employers can choose to offer an HSA-compatible plan, but they cannot change the eligibility requirements outlined by the federal government (U.S. Department of the Treasury, 2021).
Reference: U.S. Department of the Treasury. (2021). Health Savings Accounts (HSAs). https://home.treasury.gov/policy-issues/financial-services/health-savings-accounts-hsas
FSA Types and Plan-Specific Rules
There are different types of FSAs, including Healthcare FSAs, Limited Purpose FSAs, and Dependent Care FSAs. Employers can choose to offer one or more of these types of FSAs and set their own rules within the federal guidelines. For example, employers can choose to offer a grace period or a carryover option for unused FSA funds, but they cannot exceed the limits set by the IRS (SHRM, 2021).
Society for Human Resource Management (SHRM). (2021). Flexible Spending Accounts (FSAs). https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/flexible-spending-accounts.aspx
Employer Contributions
Both HSA and FSA accounts can receive contributions from employers. While the IRS sets the maximum total contribution limits for these accounts, employers can choose how much they want to contribute. Some employers may offer matching contributions for HSAs or provide a set amount for FSAs, while others may not contribute at all (Lively, 2021).
Reference: Lively, Inc. (2021). HSA vs. FSA: What’s the Difference? https://livelyme.com/hsa-vs-fsa/
Plan Providers
Employers often partner with third-party plan providers to administer HSAs and FSAs. These providers may have their own rules and guidelines within the scope of federal regulations, such as fees, investment options, and customer service offerings. Employees should carefully review the details of their specific HSA or FSA plan to understand any additional rules or limitations (HSA Store, 2021).
Reference: HSA Store. (2021). HSA vs. FSA: What's the Difference?https://hsastore.com/learn/hsa-vs-fsa.html
So while HSAs and FSAs are subject to government regulations, individual plans and employers can still have an impact on the specific rules and benefits of these accounts. To fully understand their own HSA or FSA, employees should consult their employer's plan documentation and the plan provider's guidelines.
Can HSAs/FSAs Be Used For Co-Pays?
Yep, HSAs and FSAs can be used for co-pays. Co-pays are a type of out-of-pocket expense that individuals are responsible for paying when they receive medical care. Co-pays can be paid using HSA or FSA funds, as long as the co-pay is for an eligible expense. Eligible expenses include medical care, prescription drugs, and medical supplies, among others. However, it is important to note that not all expenses related to medical care are eligible for HSA or FSA reimbursement, so it is always best to check with your plan administrator or employer to understand the specific rules and regulations of your plan.