As more people look for ways to stretch their healthcare dollars, businesses that accept Health Savings Account (HSA) and Flexible Spending Account (FSA) cards have a distinct advantage. If your business provides health-related products or services, you may be eligible to accept FSA cards or HSA cards. But before you start, knowing whether your business qualifies and what steps you need to take is essential.
How HSA and FSA Payments Work
HSA and FSA cards function like debit cards, allowing people to pay for qualified medical expenses using pre-tax funds. While both accounts serve similar purposes, they have key differences. HSA funds belong to the account holder and roll over from year to year, meaning unused money isn’t lost. On the other hand, FSA funds are typically “use it or lose it,” with a spending deadline each year. The IRS regulates these accounts, so businesses must meet specific criteria to accept them as payment.
Does Your Business Fall into an Eligible Category?
Not every business canaccept HSA cards and FSA cards. The IRS restricts their use to healthcare-related expenses, meaning businesses that provide medical services, health-related products, or certain wellness treatments may qualify. Here are some examples of eligible businesses:
- Medical providers (doctors, dentists, chiropractors, physical therapists)
- Vision care providers (optometrists, eyewear retailers, LASIK providers)
- Pharmacies (including those selling over-the-counter eligible products)
- Medical spas (for certain treatments, like dermatology-based services)
- Wellness services (acupuncture, massage therapy with a doctor’s prescription)
If your business offers products or services related to healthcare, you may be eligible to accept these payments. However, eligibility often depends on your Merchant Category Code (MCC).
Merchant Category Codes (MCCs) Explained
Every business that accepts credit card payments has a Merchant Category Code (MCC) assigned by its payment processor. HSA and FSA card issuers use this code to determine eligibility for transactions.
HSA/FSA payments are likely to be approved if a business is classified under a healthcare-related MCC. However, incorrect classification, such as being listed under general retail, can lead to declined transactions.
To avoid issues, businesses should check their MCC with their payment processor and request a reclassification. Ensuring the correct MCC helps prevent rejected HSA/FSA transactions.
Choosing an HSA/FSA-Compatible Payment Processor
Once the MCC is confirmed, a payment processor that supports HSA/FSA payments is required. Some businesses automatically qualify through their MCCs, while others need an Inventory Information Approval System (IIAS). This system verifies eligible expenses at the point of sale and ensures compliance with IRS guidelines.
Not all payment processors support HSA and FSA transactions, so businesses should research options that allow them to accept FSA cards and HSA cards. The right payment system will recognize qualified purchases and process them accordingly.
Compliance and Documentation Requirements
Even if a business qualifies, maintaining compliance is essential. The IRS requires businesses to identify eligible and ineligible expenses at checkout, provide itemized receipts for customers who may need to submit claims, and keep records of HSA/FSA transactions for potential audits. Some services, such as massage therapy or medical-grade skincare, may also require a doctor’s prescription for payment approval.
To simplify this process, certain payment processors help businesses accept HSA cards and FSA cards while assisting them to stay compliant by automatically verifying eligible purchases and categorizing transactions correctly. Using the right system ensures smoother transactions for both businesses and customers while reducing the risk of rejected payments.
How to Start Accepting HSA/FSA Cards
If a business qualifies, the following steps can be taken to start accepting HSA/FSA payments:
- Verify the MCC – Ensuring the business is correctly classified with the payment processor is the first step.
- Select a compliant payment processor – The processor should support HSA/FSA transactions and, if necessary, include IIAS functionality.
- Ensure compliance with IRS guidelines – Proper categorization and documentation practices must be followed.
- Train staff – Employees should be educated on eligible expenses and how to handle customer inquiries about HSA/FSA payments.
- Promote the payment option – Customers should know that the business accepts HSA and FSA cards.
Conclusion
Accepting HSA and FSA cards is a smart way to attract health-conscious customers while increasing sales. However, eligibility depends on the type of business, MCC classification, and payment processing setup. By verifying eligibility, selecting the right processor, and maintaining compliance, businesses can successfully integrate HSA/FSA payments into their operations.
