Mental health care is critical to maintaining overall wellness - just as important as caring for your physical health. And as we noted in a recent article, 1 in 5 of us live with mental health issues on a daily basis. As many as 30% of those with a mental health issue don’t seek treatment, and a common obstacle to that care is cost.
The good news is that you can pay for some mental health treatments and services with your Flexible Spending Account (FSA) or your Health Savings Account (HSA), to offset out-of-pocket expenses. This week’s article summarizes what mental health services qualify for coverage with FSA and HSA funds and how to use these accounts for mental health care. Be sure to click on the links included in this article, as we’ve referenced the original IRS and government sources for further information.
What’s the difference between an FSA and an HSA?
FSAs are an arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars. You decide how much to put in an FSA, up to a limit set by your employer. Employers may make contributions to your FSA, but aren’t required to.
An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. HSA funds generally may not be used to pay premiums. While you can use the funds in an HSA at any time to pay for qualified medical expenses, you may contribute to an HSA only if you have a High Deductible Health Plan (HDHP) — generally a health plan that only covers preventive services before the deductible.
It may sound complicated - but FSAs and HSAs are often a win-win for many people, as they allow you to reduce your tax liability and pay for your mental health care expenses, using pre-tax funds.
Is mental health treatment eligible for HSA or FSA funds?
According to the IRS, mental health therapy and treatment that is deemed ‘medically necessary’ is eligible for reimbursement with an FSA or an HSA - things like psychiatric care, and treatment for drug or alcohol addiction. So therapy such as marriage or family counseling - that is not required for a medical or mental purpose - may not qualify. The actual wording from the IRS is this: “treatment provided by a psychologist or psychiatrist is eligible for FSA or HSA reimbursement if the purpose of the treatment is for medical care and not for the general improvement of mental health”. Sound a bit murky? The best thing to do is to speak with your your health insurance directly to understand how to approach the situation first.
Regardless of the kind of health care services you are getting, an administrator may require you to get a ‘Letter of Medical Necessity’ in order to get coverage. This is a letter written by your doctor that verifies the services you are purchasing are for the diagnosis, treatment or prevention of a disease or medical condition.
Make the most of your HSA to cover mental health expenses
The IRS-approved list of mental health care expenses on which you can use your HSA includes services like psychologist visits (including online therapy), psychiatric care, alcoholism and drug treatment, and prescription drugs related to psychiatric care. You can pay for these with an HSA card or by getting reimbursed, but either way, always save your receipts. You’ll need these when you file your tax return each year. You can ask your health care provider for itemized receipts after each service, or a total record of all services at the end of the year.
If you have health insurance (and remember, it must be a High Deductible Health Plan in order to be allowed to contribute to an HSA), you can use your HSA funds for any qualified expense that’s not paid directly to the provider or for which you’re not reimbursed by your insurance company. This includes co-pays and expenses to meet your deductible, as well as any uncovered medical expense.
Using an FSA to cover mental health expenses
Eligible mental health care expenses for which you can use your FSA account include alcoholism and drug treatment, psychiatric care (including online therapy), and prescription drugs related to psychiatric care. You use your FSA by submitting a claim to the FSA (through your employer) with proof of the medical expense and a statement that it has not been covered by your plan. You will then receive reimbursement for your costs. In addition, according to the IRS, you can use FSA funds to pay deductibles and copayments, but not for insurance premiums.
In summary, understanding how to use FSAs and HSAs to help offset the cost of behavioral health may feel confusing or overwhelming - but it's worth digging into, as these accounts may save you money. For more help, you can ask your employer, an accountant, reference IRS Publication 969, or research online yourself. Here’s a good article that goes into more detail - in an understandable way - about the differences between HSAs and FSAs.