How Do HSA Reimbursements Work?

Health and wellness start with the choices we make for our own lives. Exercise, vitamins, supplements, skincare, and health food are medicine — they keep us thriving and act as an effective preventative measure against many conditions that can have a serious negative impact on our lives.

HSA funds allow people to make purchases to promote their health and wellness with pre-tax money. Some of these purchases are direct, and some of these purchases are eligible for reimbursement from an HSA account. Here’s how reimbursements work and what business owners need to know about accepting HSA funds for eligible purchases.

What Is an HSA Account?

An HSA account, or a health savings account, is a special bank account that people can use to store pre-tax money for healthcare-related purchases. It covers the obvious expenses, like copays and prescription costs. It also covers things like first aid supplies, skincare, and home and vehicle modifications for people with disabilities.

HSA funds can cover things like gym memberships, workout equipment, health foods, and supplements with a Letter of Medical Necessity. If a doctor declares that these expenses are necessary for someone’s health, they’re allowed to reimburse their costs through their HSA. 

Is an HSA Account the Same as an FSA Account?

HSA and FSA accounts are used in similar ways, but they’re different types of accounts. An HSA is controlled by an individual who has unlimited access to their own funds with no expiration date. An FSA, or flexible spending account, is controlled by an employer. Employers have the final say in what an FSA will cover, and unused funds expire at the end of the year. 

HSA accounts are typically used by entrepreneurs, self-employed people, contractors, and people who specifically choose to manage their own healthcare funds. FSAs are typically used by employees of companies that offer an optional FSA.

How Does an HSA Account Work?

HSA accounts are self-managed healthcare savings and spending accounts. Rather than utilizing an FSA (flexible spending account) controlled by an employer, people have the option to maintain sole ownership of their own accounts. 

Many credit unions and banks give members the option to open an HSA account. You’ll deposit a pre-tax income contribution into that account, which is where it will stay without expiration. Unused funds roll over indefinitely and may accumulate interest. Withdrawals for non-HSA-related purchases can be made with a 10% tax penalty. 

Some financial institutions will issue a debit card linked directly to the HSA. Eligible retailers can accept this debit card as a form of payment for HSA-eligible purchases. You’re able to buy HSA-eligible products or services from any retailer, save the receipt, and use the receipt as proof of purchase to reimburse yourself from your HSA. It’s similar to the process of writing off a business expense, but it’s for your health instead.

What Can You Buy With HSA Funds?

HSA funds will cover nearly any expense that’s directly related to healthcare, from expenses relating to doctor visits to over-the-counter medicine purchases. HSA funding can be used to make improvements to homes or vehicles to make them more accessible to people with disabilities. HSA funds even cover first aid kits and sunscreen. 

A Letter of Medical Necessity opens new doors for HSA eligibility. Things like gym memberships and vitamin purchases aren’t ordinarily covered by HSA funds, but they can be if your doctor decides that they’re necessary for your well-being. 

Things like saunas, cold plunges, hot tubs, sleep wellness products, and digital fitness trackers can sometimes be HSA reimbursable. If you want to make a medical purchase that isn’t ordinarily covered by an HSA, speak to your doctor. 

How Do HSA Reimbursements Work?

Most reimbursements work by showing the amount you spent in the form of proof of purchase to someone who is in control of relevant funding. They’ll send you a check or give you cash to cover the reimbursable amount of what you spent.

When you have an HSA, you’re both the person in control of the funding and the person being reimbursed. You reimburse yourself through your own HSA, which leaves a paper trail that you can use to prove on your taxes that the money in your HSA account was spent appropriately.

If you’re a retailer or business owner offering HSA/FSA payment processing on eligible goods, you don’t have to do anything to facilitate the reimbursement process. All you need to do is provide your customers with a receipt or proof of purchase that shows what they purchased and the price of each product or service. They’ll hang on to the receipt and use it to reimburse themselves from their HSA. 

How Do You Reimburse Yourself From Your HSA?

Save your receipts for HSA-eligible purchases and add up the total amount on each receipt that’s reimbursable. You can delay reimbursement for as long as you’d like — you don’t need to immediately reimburse yourself for a $4 bottle of over-the-counter pain relievers. There is no minimum or maximum amount for reimbursement because it’s all your money, and you’re in complete control of managing your HSA account.

If you have several receipts and prefer to wait until you reach a specific dollar amount, like $100, you can wait until you’ve accumulated enough purchases to reach that reimbursement figure. 

There is no time limit for reimbursement. As long as your HSA account is active and you have receipts for purchases that took place after your account was open, you can reimburse yourself indefinitely. If you choose to wait several years for reimbursement to allow your account to accrue interest, you’re allowed to do so. Just make sure you keep track of your receipts. 

You can reimburse yourself by withdrawing cash from your HSA via an ATM with your HSA debit card or by paying a visit to the financial institution where your HSA is established. You also have the option of writing yourself a check from your HSA account or directly transferring the amount from your HSA account to your personal bank account. 

Keep your receipts and proof of reimbursement for your taxes. Receipts and transaction records work together to prove that you used your pre-tax funds in accordance with HSA rules. 

How Do HSA Reimbursements Work With a Letter of Medical Necessity?

Some HSA purchases require a letter of medical necessity. Most HSA purchased gym memberships, wellness services, supplements, and health foods are only reimbursable if a doctor declares that the purchase was necessary for your health. In most cases, it should be obvious that there is a clear health benefit to using health products or services. It’s likely your doctor will agree that most health and wellness purchases are a direct benefit to your health.

Before you make your purchase, you can have a doctor write you a Letter of Medical Necessity. You’ll follow the same purchasing and reimbursement process, but you’ll keep your letter with your receipt to serve as proof that your purchase was eligible. 

Do All HSA Purchases Work Through Reimbursement?

Some HSA purchases are reimbursable, but people can use debit cards attached to their HSA accounts to make eligible purchases. HSA accounts are different from normal bank accounts and require a separate payment processing system. 

Some retailers accept direct HSA payments, which significantly simplifies the process for their clients or customers. Instead of going through the process of reimbursing themselves, they can purchase goods and services with a debit card just like they would with any other purchase. 

Ease of use incentivizes people to utilize their HSA funds for health and wellness-related purchases. If all they have to do is complete a normal checkout process, they may feel more inclined to buy health and wellness products. 

Make the Most of Your HSA

HSA reimbursements are handy for purchases made on the fly. They’re a lot more complicated for people who regularly invest in their health or wellness. People who spend a lot of time and money on health maintenance and self-care would often rather shop with businesses that accept their HSA cards.

Truemed makes it easy for you to use your HSA funds. Choose “Pay With Truemed” at checkout with one of our merchants and enter your payment details — you’ll be asked a few questions about your health circumstances, and then we’ll match you with a provider who will determine eligibility. If you qualify, you’ll receive a Letter of Medical Necessity that you can use to complete your purchase using your HSA.

Sources:

What's a Health Savings Account? | Centers for Medicare & Medicaid Services

Health Care Options, Using a Flexible Spending Account FSA | HealthCare.gov

Health Savings Accounts and Medicare Beneficiaries | Center for Medicare Advocacy

Letters of Medical Necessity | US Department of Labor Office Of Workers Compensation Programs