Using HSA and FSA Funds for Telehealth Care

Most telehealth consultations for the treatment of a medical condition are eligible expenses. The boundary sits in places people do not expect — and cannabis certification is on the wrong side of it no matter what your state says.

This is general information, not tax advice. Rules change, plan documents differ, and individual circumstances matter. Confirm anything specific with a tax professional or your plan administrator before you rely on it.

What these accounts are

A Health Savings Account is available to people enrolled in a qualifying high-deductible health plan. Contributions are tax-advantaged, the account is owned by you, unspent funds roll over indefinitely, and it moves with you between employers. Distributions for qualified medical expenses are tax-free.

A Flexible Spending Arrangement is employer-established. You elect an amount for the year, deducted from pay before tax. It belongs to the plan rather than to you, and it is generally use-it-or-lose-it, though many plans offer either a short grace period after year end or a limited carryover — not both. Leaving the employer usually ends access. Health Reimbursement Arrangements are a third category, employer-funded, with terms set by the employer.

The mechanics differ. The eligibility question is largely the same for all of them, and it comes from the tax code.

The eligibility test

Qualified medical expenses are defined by Internal Revenue Code Section 213(d): amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting a structure or function of the body. IRS Publication 502 works through what that means in practice, and it is the document to consult rather than a blog post.

The critical phrase is medical purpose. An expense is not qualified because it is good for you, and not disqualified because it also happens to be pleasant. The question is whether it treats or prevents a specific condition.

What is generally eligible

Telehealth consultations for diagnosis or treatment of a medical condition. A remote visit is treated the same as an in-person one; the medium is not the issue.

Prescription medications. Most drugs prescribed for a medical condition qualify. Insulin has its own explicit treatment in the rules. Since 2020, over-the-counter medicines no longer require a prescription to be eligible, and menstrual care products were added at the same time.

Laboratory work, diagnostic tests and imaging.

Mental health treatment. Psychiatric consultations, psychotherapy, and prescribed medication for a diagnosed condition. Treatment that is off-label but prescribed for a medical condition is still treatment — off-label status is a regulatory question about the drug's labelling, not a tax question about the purpose of the expense. Ketamine treatment for depression is typically approached on the same footing, though documentation matters and a plan administrator's view is worth confirming in advance. The regulatory background is in Spravato vs generic ketamine.

Weight-loss treatment for a diagnosed condition. This is where the medical-purpose test does visible work. Programmes and treatment undertaken for general health or appearance are not qualified; treatment prescribed by a physician for a specific diagnosed disease — obesity, hypertension, heart disease — generally is. Prescription weight-loss medication follows the same logic. Our weight management service operates on a clinical assessment basis, which is the relevant distinction; compounded preparations raise their own separate issues, covered in the piece on compounded GLP-1s.

Hormone treatment for a diagnosed condition. Testosterone replacement prescribed for diagnosed hypogonadism is treatment of a medical condition. Testosterone sought for performance or anti-ageing purposes without a diagnosis is a harder position to defend — the same distinction drawn clinically in TRT is not an anti-aging treatment. Our TRT service requires diagnosis before treatment for clinical reasons; it also happens to produce defensible documentation.

What generally is not

Anything without a medical purpose. Vitamins and supplements taken for general health. Gym memberships. Wellness apps. Nutritional products bought as food rather than treatment.

Most cosmetic treatment. The tax code addresses this directly: cosmetic surgery and similar procedures are excluded unless necessary to correct a deformity arising from a congenital abnormality, injury from accident or trauma, or disfiguring disease.

Insurance premiums, from an HSA, except in specific listed situations such as COBRA continuation coverage, coverage while receiving unemployment compensation, and certain Medicare premiums.

Expenses reimbursed elsewhere. You cannot claim from an FSA something insurance already paid, and you cannot claim the same expense twice.

Illegal treatments and drugs under federal law — which brings us to the exception that catches people out.

The letter of medical necessity

Some expenses sit in a middle category: eligible when they treat a specific condition, ineligible when they are for general wellbeing. Weight-loss treatment is the classic example. So are certain nutritional supplements, some equipment, and specialised diets.

A letter of medical necessity establishes which side of the line you are on. Written by a treating clinician, it should state the diagnosed condition, the specific treatment or item recommended, why it is medically necessary to treat that condition rather than for general health, and the expected duration. It is not a formality — a letter saying "this patient would benefit from a healthier lifestyle" establishes nothing.

Get it at the time of the expense, not two years later when a question arises. Many plan administrators publish a template, and using it removes an argument. A letter does not override the cannabis position; nothing does, because the obstacle there is federal illegality rather than lack of evidence of purpose.

Documentation, which is the part that matters

FSAs are usually substantiated up front — the administrator asks for a receipt. HSAs are not. Nobody reviews your HSA distributions at the time; they are reviewed if you are audited, potentially years later, and at that point the burden is on you.

Keep, for every expense:

• An itemised receipt showing provider, date, service and amount. A credit card statement showing a charge to a clinic is not an itemised receipt.
• The explanation of benefits if insurance was involved.
• The prescription for prescribed items.
• A letter of medical necessity where the medical purpose is not obvious on the face of the receipt.
• A note of the diagnosis or condition the expense relates to.

Keep them at least as long as your tax records generally, and longer for an HSA if you use the reimburse-later strategy — paying out of pocket now and reimbursing yourself years later, which is permitted provided the expense was incurred after the account was established and has not been reimbursed elsewhere. That approach depends entirely on records kept at the time.

A folder, digital or physical, with a receipt filed the same week, is the whole system. People who lose an audit rarely lose it on eligibility. They lose it on paperwork they no longer have.

Two practical points before you use the card

Ask the practice whether it provides an itemised receipt with a service description, and whether it accepts HSA and FSA payment. A practice charging a transparent consultation fee regardless of outcome produces cleaner documentation than one whose pricing is contingent — another reason that structure matters, as set out in how to spot a prescription mill.

And check your own plan documents. Employer FSAs may be limited-purpose, restricted to dental and vision, which changes the answer regardless of what federal rules permit.

For the broader question of what remote care suits before you spend anything on it, start with what telehealth is actually good for. To talk to a clinician about whether a treatment is appropriate for you, book a consultation — and then take the receipt to someone who does tax for a living.