Can You Use HSA and FSA Funds for Online Therapy? 

Can You Use HSA and FSA Funds for Online Therapy? 

​As more people seek mental health support, questions about financial options for treatment have become more relevant. Specifically, many are curious about using Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) to cover therapy expenses. This article delves into whether you can use HSA for therapy, including online sessions, and explores whether FSA can be used for treatment.

Right off the bat, the answer is yes; HSA & FSA funds can be used to pay for in-person or online therapy if it’s medically necessary for your physical or mental health. However, some services may require a letter of medical necessity (LOMN) to qualify. 

Understanding HSA and FSA

An HSA is a tax-advantaged savings account for individuals with high-deductible health plans (HDHPs). It allows you to save money for medical expenses while enjoying certain tax benefits. 

In contrast, an FSA is an employer-sponsored benefit that lets employees set aside pre-tax earnings for qualified medical costs. 

AspectFSA (Flexibility Spending Account)HSA (Health Savings Account)
EligibilityAvailable through employers. Not an option for the self-employed.Must be linked with a high-deductible health plan. Available to self-employed individuals.
Tax AdvantagesContributions are deducted from your paycheck before taxes, adhering to the IRS’s maximum limit. Reduces your taxable income, and no taxes are paid on funds used for eligible medical expenses.Contributions are pre-tax and can be invested, accruing earnings tax-free. The IRS caps annual contributions. Funds used for eligible expenses are not taxed.
Fund RolloverFunds are generally recovered if used by the end of the plan year. Some employers might allow carrying over a part of the balance or provide a grace period.Funds roll over annually without expiration, allowing for long-term accumulation.
Penalty for Non-Qualified ExpensesNon-qualified expenses might not incur an IRS tax penalty, but employers could request reimbursement for such expenditures.Expenses not qualifying may attract a 20% tax penalty imposed by the IRS for individuals under 65.

Can You Use HSA for Therapy?

Yes, you can use HSA for therapy. This includes traditional face-to-face and online therapy sessions, provided the treatment is a qualified medical expense. 

The Internal Revenue Service categorizes eligible medical expenditures as those related to the diagnosis, healing, alleviation, therapy, or prevention of illnesses, as well as expenses for procedures that impact any body part or function.

Therapy falls under this category as it is a form of treatment for mental health issues. Therefore, if you have an HSA, you can use the funds in your account to pay for therapy sessions. 

Does HSA Cover Therapy Without Restrictions?

Does HSA Cover Therapy Without Restrictions

While HSAs cover therapy, there are some conditions to remember. The therapist should be a licensed psychologist, psychiatrist, or clinical social worker. Ensuring that the platform offers licensed professionals is crucial if you opt for online therapy.

Furthermore, the therapy should be for treating a specific medical condition or maintaining mental health. For example, general life coaching or marriage counseling for non-medical reasons might not qualify.

HSAs are particularly advantageous for long-term savings and investment, as they allow funds to accumulate tax-free and be used for qualified medical expenses.

Can FSA Be Used for Therapy?

Can FSA Be Used for Therapy

FSAs are also applicable for therapy expenses. Since FSAs operate on a pre-tax basis, using them for therapy can provide financial benefits. Like HSAs, FSAs require that the therapy sessions are deemed medically necessary. This means a healthcare professional should recommend them for the diagnosis, cure, mitigation, treatment, or prevention of a disease or a health condition.

One thing to note about FSAs is the “use-it-or-lose-it” rule. Unlike HSAs, which roll over unused funds year to year, FSAs generally require you to use the funds within the plan year. Some plans, however, offer a grace period or allow a small amount to roll over.

FSAs are more suitable for short-term healthcare spending, as they typically require funds to be used within the plan year, with some exceptions for carryover or grace periods​

How Significantly Can an FSA or HSA Reduce the Expenses Associated With Mental Healthcare?

How Significantly Can an FSA or HSA Reduce the Expenses Associated With Mental Healthcare?

Utilizing your FSA or HSA funds for mental healthcare can be a financially efficient choice, offering tax savings while covering various costs. These accounts allow you to allocate funds towards deductibles, copayments, and coinsurance related to mental health services.

Even if your therapist is not within your health insurance network, you can still utilize your FSA or HSA for payments, assuming these expenses are eligible. This applies to treatments not typically covered by insurance, such as alternative therapies like acupuncture, which are often suitable for reimbursement through FSA and HSA.

For instance, if you contribute $3,500 to your HSA and fall within the 22% tax bracket, the pre-tax nature of HSA contributions means you could save about $770 in taxes that year. This makes the entire $3,500 available for you to use on eligible medical expenses, effectively reducing your healthcare costs.

What Types of Mental Health Services are Eligible for HSA Reimbursement?

What Types of Mental Health Services are Eligible for HSA Reimbursement

The eligibility of mental health services for HSA coverage largely depends on the reason for seeking treatment. If you’re diagnosed with a mental health condition such as depression, bipolar disorder, schizophrenia, or borderline personality disorder, your HSA can be used for therapy costs.

On the other hand, therapy for reasons not considered “medical” by HSA standards, like marriage counseling, grief counseling, or stress management, typically isn’t eligible for HSA funds. 

For mental health services deemed medically necessary, you can use your HSA for various treatments:

  • Psychotherapy Sessions: Psychotherapy, or talk therapy, is crucial for treating many mental health conditions. Since health insurance may not cover the entire cost, an HSA can be used to cover the remaining expenses.
  • Medications Prescribed by a Psychiatrist: Medications prescribed for mental health conditions are eligible for HSA reimbursement, which can be particularly helpful for high co-pay prescriptions or those not covered by insurance.
  • Inpatient Psychiatric Care: This includes any prescription medication prescribed for mental health treatment and is generally eligible for reimbursement from your HSA.
  • Mileage and Travel Expenses: Your HSA can reimburse you for mileage, tolls, and parking when traveling to and from medically necessary appointments. It’s essential to keep accurate records of your travel for reimbursement.
  • Transportation Costs: Expenses related to travel for medically necessary therapy sessions can be covered by an HSA. Documentation, such as a prescription or diagnosis, might be required to substantiate these expenses.
  • Lodging and Meal Allowance: For therapy sessions requiring travel over 50 miles from home, your HSA can cover up to $50 per night per person for lodging expenses.
  • Psychiatric Care: As a medical specialty, psychiatric care, including both therapy and medication, is a covered expense under an HSA.
  • Specialized Treatment: Treatments at technical facilities, such as substance abuse clinics, are eligible. Additionally, acupuncture for mental health care and transportation for outpatient group meetings, like NA or AA, are included.
  • Gym Memberships: If exercise is part of your prescribed medical treatment plan for a mental health condition, your HSA might reimburse gym membership fees. A letter of medical necessity may be required.
  • Over-the-counter (OTC) Products: Various OTC products related to mental health care, like herbal supplements or light therapy machines for SAD, can be reimbursed. Many of these products are available at FSA stores.

Does HSA Cover Online Therapy Specifically?

Does HSA Cover Online Therapy Specifically

The rise of online therapy platforms has changed the landscape of mental health services. Online therapy offers convenience, accessibility, and, often, a more affordable option compared to traditional treatment. The good news is that HSAs generally cover online therapy as long as a licensed professional provides the services for a medical reason.

However, checking with your HSA provider or online therapy platform is advisable to confirm coverage. Some HSAs have specific stipulations or require additional documentation for online therapy services.

The Consolidated Appropriations Act of 2023 has expanded the safe harbor provisions for Health Savings Accounts (HSAs), permitting plans with high deductibles (HDHPs) to provide immediate coverage for telehealth services, such as online therapy. This enhancement does not impact the capacity of members to contribute to their HSAs on a pre-tax basis.

How to Use HSA or FSA for Online Therapy?

If you’re planning to use your HSA or FSA for therapy, here are some steps to follow:

  • Verify Eligibility: Confirm your therapy is eligible for HSA or FSA use. This typically means ensuring that your therapist is a licensed professional and that the treatment is for a medical condition.
  • Understand Your Plan: Each HSA and FSA plan may have rules and requirements. Familiarize yourself with these to ensure you’re compliant.
  • Keep Records: Maintain detailed receipts and records of your therapy sessions, or record them using the meeting software you use. These may be needed for tax purposes or reimbursement claims.
  • Claim Expenses: Depending on your plan, you may pay upfront, seek reimbursement, or use a provided debit card linked to your HSA or FSA.

Some mental health services might require a LOMN for HSA reimbursement. This document, provided by a healthcare provider, explains the essential need for specific treatment​​. 

Key Takeaways
  • HSAs cover both in-person and online therapy if it’s a medical expense.
  • FSAs also pay for therapy but require spending within the plan year.
  • Therapy must be by licensed professionals to qualify for HSA or FSA.
  • HSAs cover mental health services for medical conditions, excluding some non-medical therapies.
  • HSAs and FSAs offer tax advantages, reducing taxable income.
  • Record-keeping and understanding plan rules are essential for HSA or FSA usage.
  • Online therapy is eligible for HSA coverage, especially post-2023 legislation.