What Every Wellness Brand Gets Wrong About HSA/FSA Eligibility

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Misconception 1: Only prescriptions qualify

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Many merchants assume HSAs and FSAs are strictly for prescriptions or doctor copays. The IRS makes it clear that eligibility goes far beyond prescriptions. Sunscreen with SPF 15 or higher, menstrual care products, first aid kits, and contact lenses are automatically covered. These are everyday items that customers already purchase, which means they can be marketed as eligible without extra paperwork.

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Supplements and wellness products often qualify with a Letter of Medical Necessity (LMN). If a doctor recommends vitamin D for a diagnosed deficiency, or magnesium for chronic migraines, those purchases meet IRS requirements. Fitness and recovery products fall into the same category. A massage gun used to manage muscle pain or an ergonomic chair prescribed for back pain can qualify when tied to a documented medical need.

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Misconception 2: Wellness products are excluded

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The word “wellness” often misleads merchants into thinking their catalog will not qualify. In reality, wellness is one of the fastest-growing eligible categories. The IRS allows expenses that prevent or treat a medical condition. That covers supplements, sleep aids, stress relief products, and recovery equipment when medically justified.

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Even functional foods can qualify when tied to a condition. Gluten-free groceries for celiac disease, low-glycemic products for diabetes, or medical nutrition shakes for patients recovering from illness are eligible when accompanied by an LMN. Merchants selling these products often overlook that connection and miss out on customer spending power.

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Misconception 3: Eligibility is too complex to manage

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Complexity is a common concern. Merchants picture endless paperwork, regulatory filings, or liability risk. The reality is simpler. The IRS has already published guidelines in Publication 502. Plan administrators enforce those guidelines through documentation requirements. When a product clearly fits a medical purpose and the customer provides an LMN if needed, the process is straightforward.

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Merchants are not responsible for writing LMNs or storing patient data themselves. Their responsibility is to make sure products are labeled correctly and customers are not misled. Once that framework is in place, eligibility becomes a competitive advantage instead of a headache.

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Misconception 4: It is too risky to promote eligibility

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Some merchants avoid the HSA/FSA space because they fear being caught in an audit or accused of promoting products incorrectly. The greater risk is inaction. Each year more than 3 billion dollars in FSA funds are forfeited because customers do not know what qualifies or where to spend them. If your brand does not make eligibility clear, those dollars will go to a competitor that does.

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Risk only becomes real when merchants rely on shortcuts, such as auto-approved LMNs or promoting cosmetic items as eligible. When eligibility is handled properly, merchants are simply giving customers accurate information that helps them save money. That builds trust instead of creating liability.

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Why these myths persist

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Much of the confusion comes from mixed signals in the market. Some new processors promise instant approvals or market all supplements as eligible. When customers discover claims are denied, they lose trust not only in the processor but also in the merchant. Other times, merchants hear outdated advice that HSAs and FSAs only cover prescriptions. Without clear education, the myths spread.

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Another factor is the broadness of the IRS rules. Terms like “primarily for medical care” leave room for interpretation. That uncertainty makes merchants cautious. But with proper documentation, the scope of eligibility is broader than most brands realize.

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The opportunity merchants miss

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Every misconception leads to lost revenue. Supplements, recovery equipment, and functional foods are multi-billion-dollar categories in ecommerce. Most already fit within IRS guidelines when documented correctly. Yet many merchants never promote that fact. Customers end up paying out of pocket or abandoning carts because they do not realize they could use pre-tax dollars.

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By breaking through these myths, merchants can position themselves as trusted resources for customers. Clear labeling, accurate education, and respect for compliance allow brands to capture a share of the billions sitting in HSAs and FSAs every year.