The Loop

HSA-Approved Expenses For Mental Health

Filed under: Benefits

In the Spring of 2020, when Congress passed the CARES Act, the legislation expanded the types of products that can be paid for with a health savings account. Funds from this account may now be used to pay for a wide range of products, including over-the-counter medications, cooling headache pads, feminine care items, birth control pills, pregnancy and fertility tests, as well as many mental health treatments and services.

An HSA is a tax-advantaged savings account that can be opened in conjunction with an HSA-compatible high-deductible health plan. The savings account is designed to help people save money to pay for out-of-pocket expenses such as their plan’s high deductible, copayments, and other qualified purchases. In 2021, the annual contribution limit for a health savings account is $3,600 for individuals and $7,200 for families. Account owners age 55 and older can make an additional $1,000 contribution each year 

Prior to passage of the Patient Protection and Affordable Care Act (PPACA) in 2010, it was nearly impossible for someone diagnosed with bipolar disorder or schizophrenia to obtain individual health insurance in most states. Even people suffering from or who had a history of mental health disorders such as depression, anorexia, or alcoholism could be declined or charged higher premiums for coverage. However, the PPACA mandated that small-group (fully insured) and Medicaid expansion plans cover 10 essential health benefits – which included mental health and substance abuse services.

However, while these services must be covered under a health plan, they may be subject to a deductible, co-pays or co-insurance. People with an eligible high-deductible plan may open a health savings account and contribute money on a pre-tax basis. These funds can then be used to pay for qualified expenses before coverage kicks in.

This essentially means that untaxed income may be used to pay for mental health and substance abuse expenses that may or may not be covered by their health plan, such as:

  • Behavioral counseling, psychotherapy visits, and psychiatric appointments
  • Couples and family counseling, including group therapy
  • Prescription and over-the-counter medications
  • Mental and behavioral health assessments, evaluations, and tests
  • Substance abuse treatment programs
  • Psychiatric hospitalization
  • Rehabilitation facilities
  • In-home mental health support services and life-care services for mentally disabled individuals
  • Alternative therapies, such as chiropractic, acupuncture and massage therapy
  • Lodging and meal costs when traveling to obtain mental health services
  • AA meeting expenses and qualified transportation expenses to and from AA meetings

While stress is not generally classified as a medical condition, it can contribute to poor mental health. In addition to sessions with a psychologist or psychiatrist, HSA funds may be used to pay for alternative forms of therapy that have proven to be effective at mitigating stress. For example, proper spinal alignment via chiropractic therapy can effectively reduce the body’s cortisol levels, which in turn diminish the impact of chronic stress on the body. Acupuncture may be used to regulate stress hormones and reduce inflammation by stimulating the vagus nerve. And massage therapy can provide both temporary relief from stress and help the body learn how to downregulate the production of stress hormones.

In some case, non-traditional mental health treatments may be permitted to be paid for with HSA funds, but they will likely require a Letter of Medical Necessity (LMN) from a licensed provider. For example, a psychiatrist may recommend yoga to help manage anxiety, or a solar lamp to relieve depression. In other words, if a mental-health practitioner deems the treatment necessary, it is likely HSA-eligible. The patient should maintain some documentation to this effect, but it’s not necessary to present evidence to the financial institution that serves as custodian of the health savings account. Use of HSA money is based on the honor system and not likely to require receipts and physician verification unless a taxpayer is audited.

One way to save money spent on mental health services is to use in-network providers. Regardless of how much the health plan covers, fees that have been negotiated by providers in the health plan’s network are bound to be less than out-of-network providers. For example, an in-network therapist may charge $50 for a one-hour visit, with a copay of $20 and insurance covers the rest. By contrast, an out-of-network provider may charge $100 an hour, with a $20 copay, and the insurer may pay only half the remaining amount. By staying in-network, the patient can use less of his HSA funds to help pay for the visit.

A recent poll revealed that 40 percent of people who have access to a health savings account do not fully understand them. This is unfortunate, but also not surprising because the rules surrounding HSAs continue to change. When Congress passed the CARES Act last spring, it reversed prior rules that prevented HSA funds from being used to pay for over-the-counter medications. Because the pandemic has dominated headlines over the past year, some of the little-known benefits of the provision related to health savings funds were not widely publicized. Employers should make a concerted effort to promote the loosening of HSA-qualified expenses, particularly given the challenging year we have all experienced.

In March, additional legislation was introduced that would permit the use of pre-tax FSA and HSA funds to pay for healthy living products and activities, such as gym memberships, fitness equipment, and sports league fees. Since many people find regular exercise helpful to mitigate stress and ward off more serious mental health conditions, the bipartisan Personal Health Investment Today (PHIT) Act would offer an additional means of paying for mental health activities with pre-tax funds.

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