Despite concerted efforts to improve accessibility, mental healthcare remains out of reach for most Americans. Studies show half the American adults with a mental illness can’t access professional help. Leading barriers to mental healthcare include the high cost of treatment, complex insurance regulations, and geographical limitations. Patients with health insurance aren’t spared either. Some policies don’t cover mental health services; when they do, the copay may be significant.
Luckily, there are other ways to reduce your copay to help you seek professional healthcare treatment without straining your finances. You can tap into the benefits of a Health Savings Account (HSA) and make mental healthcare more affordable.
This article will explain what an HSA is, its benefits, and how it improves mental healthcare accessibility. We’ll also cover the eligible services, conditions, and how to use an HSA to pay for mental health services.
Understanding Health Savings Accounts (HSA)
Many people sign up for high-deductible health insurance plans (HDHPs) because of their premiums. While that lowers your monthly expenditure, you’ll likely face high deductibles and copays whenever you need healthcare.
A Health Savings Account helps bridge this gap and ensure you have sufficient funds to cover your medical expenses. With an HSA, you get to pay for healthcare with your pre-tax dollars and unleash many compounding benefits that may last you a lifetime.
What Is an HSA?
An HSA is a tax-advantaged personal savings account that makes medical care more affordable. It lets you pay for qualified healthcare expenses such as copayments, deductibles, coinsurance, and medication with pre-tax dollars.
An HSA has the unique advantage of letting you channel more of your income toward healthcare while reducing your tax burden. All HSA contributions are deducted pre-tax, which reduces your taxable income. Depending on your tax bracket, you can save hundreds of dollars annually with an HSA account.
HSA vs. FSA
While HSA and FSA accounts deliver tax savings on medical care, they differ remarkably. A Flexible Spending Account (FSA) is an employer-provided benefit program, while an HSA is open to anyone under 65 with an HDHP.
An HSA has distinct advantages over an FSA. An HSA account is truly yours, and unlike an FSA, you can’t lose your account by switching jobs. Also, you can roll over the funds in your HSA account indefinitely, while you may forfeit all or a portion of unused FSA funds annually.
What Are the Benefits of a Health Savings Account (HSA)?
An HSA account is designed to help individuals and families save money on medical expenses. Besides padding your healthcare savings, an HSA offers compounding benefits. Since the money rolls over, you’re under no pressure to drain your account yearly. As a result, you can build a substantial healthcare fund to handle surprise medical emergencies.
You may use the HSA funds to cover your spouse’s and dependents’ medical expenses. If you have at least $1,000 in your HSA account, you may invest the funds and grow your savings with tax-free dollars.
As a tax-advantaged savings account, an HSA account also provides three unique tax advantages:
- Tax-deductible contributions: Contributing to an HSA lowers your taxable income.
- Tax-free investment earnings: You can invest the funds in your HSA account, and the earnings are tax-exempt.
- Tax-free withdrawals: All HSA withdrawals are tax-free if used to pay for eligible medical expenses such as doctor visits, hospital stays, or prescription medications.
These tax benefits only apply if you use the HSA funds for eligible medical expenses. Using your HSA funds for non-medical reasons attracts income taxes and a 20% penalty.
What Are HSA Eligibility Requirements?
The IRS sets the eligibility criteria for an HSA account, and they include:
- Enrollment in High Deductible Health Plan (HDHP): These health plans carry a higher deductible than a standard plan. For 2023, the minimum deductibles are $1,400 for self-coverage and $2,800 for family coverage.
- No disqualifying health coverage: Save for the HDHP, you may not enroll in any other health coverage, including Tricare, Medicare, or Medicaid.
- Under 65 years old: Once you turn 65, you may no longer contribute to an HSA since you’re eligible for Medicare, but you may still use your HSA funds.
- Not claimed as a dependent: You’re not eligible for an HSA account if you’re listed as a dependent on someone else’s tax returns.
Only people who file income taxes jointly or independently are eligible for the tax-advantaged health savings account. Anyone listed as a dependent on someone else’s tax returns may not open an HSA account.
How Much Can You Save on Healthcare Using an HSA?
Typically, the IRS sets the contribution limits for an HSA account. As of 2023, individuals can contribute up to $3,850, while families can contribute up to $7,750 to their HSA account.
The cost savings associated with HSA vary depending on individual circumstances, such as income and contribution levels.
Generally, an HSA saves you money by lowering your tax burden. For instance, if you’re in the 24% income bracket and contribute $3,500 to your HSA account, you’d save $840 in taxes. Without an HSA, it’d cost you $4,340 to set aside $3,500 for medical expenses.
Can You Use HSA for Mental Healthcare Treatment?
You can use your HSA to cover the cost of mental healthcare treatment and make therapy more accessible. The savings account gives you more options when seeking therapy and can help you surmount common financial obstacles. If your policy covers mental health, HSA offsets the cost of deductibles, copays, or coinsurance.
If your preferred therapist doesn’t accept insurance, you may pay them directly using the HSA funds. You may also use the funds to pay for treatment if your insurer doesn’t cover mental health. Better yet, you may use the funds to cover therapy costs for family members who need therapy but don’t have coverage.
Per the IRS guidelines, you may use your HSA funds to cover the cost of treating any mental health condition diagnosed and prescribed by a healthcare professional. All mental conditions covered by the Diagnostic and Statistical Manual of Mental Disorders (DSM-5) are eligible for coverage.
Unlike health insurance, which restricts the acceptable forms of therapy, HSA operates on a broader scale. It may cover everything your therapist recommends as part of your treatment plan, even services that may be off the coverage scope.
For instance, health club membership and massages aren’t HSA-eligible expenses. If your therapist recommends them as part of your treatment, you may use your HSA dollars to cover the cost. However, you’ll need a note from the therapist validating the recommendation to claim an HSA reimbursement.
Which Therapy Services Are Eligible for an HSA Reimbursement?
Once a therapist diagnoses a mental illness, they recommend a treatment plan encompassing one or more therapy modalities. An HSA account will help you cover the expenses associated with obtaining these services, including:
- Psychotherapy: You may use the HSA funds to pay for talk therapy sessions by a qualified psychotherapist.
- Prescription medication: Any medication that a therapist recommends is HSA-eligible.
- Inpatient psychiatric care: The HSA will cover the costs of your hospital stay or admission to a specialized psychiatric facility.
- Transportation: With proper documentation, you may recoup any costs you incur traveling to see your therapist.
- Over-the-counter products: HSA funds may cover the purchase of OTC products, such as therapy machines necessary for mental healthcare.
If your preferred therapist is more than 50 miles away, you may use the HSA to cover your travel and lodging expenses, but there’s a $50 per day limit per person. However, you may only claim reimbursement for meals bought within a hospital.
What Mental Health Conditions Does an HSA Cover?
HSA funds cover most health conditions under the Diagnostic and Statistical Manual of Mental Disorders (DSM-5). That includes:
The IRS maintains an exhaustive list of covered mental conditions, but you should verify what conditions your HSA covers for the best therapy experience.
Does an HSA Cover Medical Prescriptions?
HSA covers medication prescribed by a qualified mental health professional. According to GoodRx Health, eligible prescription drugs for mental health include:
- Citalopram (Celexa)
- Duloxetine (Cymbalta)
- Escitalopram (Lexapro)
- Fluoxetine (Prozac)
- Lorazepam (Ativan)
- Methylphenidate (Ritalin)
- Mirtazapine (Remeron)
- Paroxetine (Paxil)
Check if your insurance plan covers a prescription drug before paying for it using an HSA account. Since HSA funds don’t expire, avoiding unnecessary expenditures can help build a sizable health fund for a rainy day.
How to Use HSA for Therapy Payments
According to HSA for America, each HSA account comes with a debit card. You may use this card to pay for therapy, medication, or qualified mental health products. You have two payment options when using an HSA account for therapy. You may use the card to offset copayments and deductibles for covered services. You may also pay for therapy directly from your HSA if your insurance doesn’t cover mental healthcare. If your therapist doesn’t accept an HSA card, you may pay out of pocket and claim reimbursement from your HSA provider.
How Do You Pay for Therapy Using HSA Funds?
Paying for therapy using an HSA debit card is pretty much like a credit card but with one significant difference. You can only spend the available on the card and not a penny more.
- Identify your preferred service provider.
- Confirm if the treatment is eligible to avoid incurring penalties.
- Check your account balance to ensure sufficient funds to cover the session.
- Present the debit card during payment.
- The service provider will deduct the cost of the sessions, medication, and any other product.
- Confirm the transaction and get a receipt.
Some HSA providers configure the debit card to only pay for eligible medical expenses, while others do not. Inquire from your HSA provider how your card works to avoid expensive penalties.
You can use an HSA to pay for sessions through Grow Therapy, as well. When you book an appointment with your selected provider, you can add your HSA as a payment method for either the cost of copays or entire sessions, depending on your insurance coverage. Here’s how to add your HSA in the Grow Therapy patient portal:
- The “Billing information” tab located in your portal’s “Account” section features a green “Add a card” link under the “Credit, Debit or HSA Card” messaging.
2. Click the “Add a card” link to open the “Add card” pop-up window for entering your payment information.
3. Once all the information has been entered, click the green “Save” button. The window will return to the “Billing information” section with the new payment information being reflected.
4. Add the billing address associated with your payment form and then click the green “Save” button below the address input fields.
How Do You Claim Reimbursement?
If you pay for any HSA-eligible expenses out-of-pocket, you can claim reimbursement from your HSA provider.
- Gather supporting documentation: The IRS is a stickler for documentation. So, you need to keep detailed records with all the medical receipts. Ideally, you should maintain digital records and track the expenses on a spreadsheet. If a therapist recommends a service that an HSA does not cover, you’ll need a letter proving medical necessity.
- File a reimbursement claim: Fill in the claim form and attach the supporting documents, including receipts, itemized statements, or LOMN.
- Receive the refund: Once an HSA administrator approves the refund, they will write you a check or wire the money to your account.
The claim process may vary slightly between HSA providers, but most will allow you to file reimbursement claims online or through mail.
How Can You Prove Medical Necessity?
Sometimes your therapist may recommend a therapy modality that’s not eligible for HSA coverage. You’ll need to prove medical necessity to get coverage in such instances:
- Have your therapist write a letter of medical necessity (LOMN).
- Pay for the recommended therapy out-of-pocket.
- Attach the LOMN to the reimbursement claim and send it to your HSA administrator.
A LOMN must be highly specific and detail the type of service, its benefits, and recommended duration. However, there are no guarantees that an HSA will reimburse such an expense.
How Do You Determine Eligible and Ineligible HSA Expenses?
Your service provider will maintain an exhaustive list of eligible and ineligible HSA expenses. Generally, therapy for mental health conditions in the DSM-5 spectrum is eligible for HSA expenses. Eligible HSA expenses include:
- Consultation fees
- Travel expenses
- Health club memberships
- Prescription medication
- Hospital stays
- Specialized care
While HSA providers often make service exceptions if you provide a LOMN, there’s a limit to what’s acceptable. Ineligible HSA expenses include:
- Vacations
- Toys
- Insurance premiums
- Comfort foods
- Marriage counseling
- Non-prescription OTC medication
- Grief and loss counseling
If in doubt, check with your HSA providers to avoid incurring a 20% penalty and paying taxes on non-qualified expenses.
Can HSA Cover Out-of-Network Mental Healthcare?
An HSA account doesn’t limit your choice of therapist. You may seek therapy from an out-of-network provider if you prefer. However, you should be aware of the cost implications. Out-of-network sessions are often pricier and drain your HSA funds quickly.
In-network providers often have lower copays because they’re bound by pre-negotiated rates with the insurance company. Out-of-network providers aren’t subject to these terms. Additionally, your insurer may require that you cover a portion of the appointment costs alongside the copayment.
8 Best Practices When Paying for Mental Healthcare with an HSA
While an HSA account makes mental healthcare more accessible, it has stringent requirements. Here are some best practices to help you maximize the benefits:
1. Always confirm the eligibility of the mental health service you wish to pay for and the specific requirements and limitations set by your HSA provider.
2. Keep thorough records of all your mental healthcare expenses, including invoices, receipts, and supporting documents to support your claims and for tax purposes.
3. Understand the coverage limits, annual contribution caps, and reimbursement and payment processes.
4. To simplify the process, use your HSA debit card when paying for eligible expenses whenever possible.
5. To avoid unnecessary hiccups, understand and follow the HSA provider’s reimbursement claim process.
6. Ensure your therapist writes a detailed and specific LOMN whenever they recommend an unconventional treatment option.
7. Consult your HSA providers if you have questions or need guidance regarding mental health expenses.
8. Review your plan regularly to understand changing limits and other modifications affecting reimbursement options or coverage.
And, of course, never hesitate to contact your HSA provider directly if you have any specific questions or concerns about using your HSA funds for medical expenses.
Secure Your Mental Health with an HSA
An HSA allows you to secure your mental health and improve your quality of life. It lets pay for therapy with pre-tax dollars, lowering the cost implications. With an HSA, you can easily afford the copays and deductibles not covered by your healthcare plan. The HSA account comes with various tax benefits that allow you to maximize the value of each dollar.
You can use the fund to pay for therapy directly or seek reimbursement from your HSA provider. An HSA allows you to take charge of your mental health by lifting many obstacles health insurance poses.
If you’re ready to take the first step to improve your mental health, Grow Therapy can help match you with a therapist who can meet your needs. Use our therapist search tool to find a mental health provider in your area who specializes in your area of need and accepts your insurance.
