HSA/FSA Subscription Payments in Ecommerce: How Recurring Billing Works for Ecommerce Brands

Your customer signs up for a monthly subscription of an eligible health product. Checkout is quick and seamless, their HSA card is approved with no hiccups, and the first shipment arrives without a hitch.

Thirty days later, though, the renewal fails.

Their HSA/FSA balance has been depleted, their benefit card has expired, or the Letter of Medical Necessity (LMN) that qualified the original purchase is no longer valid. What seemed like a simple recurring payment has suddenly become a customer service issue and a missed sale.

Subscription businesses thrive on predictable renewals and HSA/FSA payments can strengthen that model by allowing qualified customers to spend pre-tax dollars on the purchase, but they also introduce compliance requirements that continue long after the first checkout.

In this guide we’ll show you when HSA/FSA subscription payments are an option for businesses, when they’re not, the challenges ecommerce brands should prepare for, and how the right payment solution can keep HSA/FSA subscription payments for ecommerce stores running smoothly.

HSA/FSA subscription payments allow customers to purchase eligible healthcare products on a recurring schedule using pre-tax healthcare funds.

Instead of returning every month to place a new order, customers subscribe once and future payments are processed automatically.

The convenience of a one-time sign up is what makes subscriptions so attractive to time crunched consumers. Unlike a one-time purchase though, eligibility can change over time. The result is that recurring billing means managing an ongoing relationship rather than a single transaction.

But which types of storefronts and subscriptions are eligible for HSA/FSA purchases in the first place?

There is a whole group of pre-approved HSA/FSA eligible products that can be sold through a subscription, no LMN required. These products include things like over-the-counter medications, medical devices, and qualified healthcare supplies like first aid kits.

These products generally create the simplest recurring billing experience because the products are always eligible and don’t need any additional documentation.

Dual-purpose products, which are products that can be used for general health and to treat medical conditions, only qualify when they're prescribed to treat or manage a diagnosed medical condition.

In these cases, customers will need a valid LMN to substantiate the eligibility of their purchase.

Dual-purpose products are more complex from a compliance perspective because LMNs aren’t valid indefinitely. Plus, without a valid LMN, the subscription stops being eligible which can create disruptions in the customer experience.

Examples of dual-purpose products that consumers may want on subscription include protein powders, certain prenatal vitamins, and other nutritional supplements.

Still not sure if your business is eligible to accept HSA/FSA payments? Read our guide *How to Become HSA/FSA Eligible: A Complete Guide for Merchants* to learn more.

So now you've determined if your business is able to accept HSA/FSA payments for one-time purchases. But if your business model is heavily dependent on subscriptions, you may be wondering how that process works with HSA/FSA cards as well.

The honest answer is that most storefronts are not equipped to accept HSA/FSA cards for recurring subscriptions. This is because D2C storefront hosts like Shopify and WooCommerce cannot natively accept third-party payment methods for subscriptions. The good news is that your customers can still pay for their subscription with HSA/FSA funds, if qualified, they'll just have to go through the reimbursement process instead of paying directly with their HSA/FSA card.

Before we walk through each path, it's worth noting that which flow you use (reimbursement or native) is a separate question from what you sell (a dual-purpose product that requires an LMN, or an always-eligible product that doesn't). Both the reimbursement model and native acceptance need to account for that product distinction, so we'll call it out again within each path below.

Here's how the two factors combine:

If you're a business that sells dual-purpose products (i.e. products that are HSA/FSA eligible for qualified customers with supporting documentation and do not fall into the category of “pre-approved”), here's how HSA/FSA subscriptions work on a reimbursement model. For this flow to work, you’ll likely need to work with an HSA/FSA payments tool, like Truemed*, in order to seamlessly and compliantly allow customers to qualify to use HSA/FSA funds on the purchase. Here’s how that works:

• The customer adds the product to their cart with the appropriate subscription applied and checks out as usual with a regular credit/debit card
• Post-purchase, the customer will receive an order confirmation email with a qualification link embedded. Customers interested in paying with HSA/FSA can click that link to enter the qualification process. In order to stay compliant, the customer must take the qualification survey on the same day as the purchase was made.
• Once in the qualification survey, the customer answers questions about their health, and at survey completion, their answers are sent to an independent licensed clinician for review.
• If qualified, the customer receives an email with their Letter of Medical Necessity (LMN). This is the document that connects the purchase to a medical need and makes the product eligible for HSA/FSA reimbursement.
• The customer continues with their subscription as usual, with their credit/debit card charged each month. They should save their LMN and all receipts, and when they're ready to submit for reimbursement, they can send the LMN and receipts to their HSA or FSA administrator, who, if qualified, will reimburse them from their HSA or FSA funds.

To learn more about HSA/FSA reimbursement, read How to Submit Your HSA/FSA Reimbursement on our Help Center.

If you're a business that sells products that are pre-approved for HSA/FSA spending, the flow is quite similar, except the customer does not need to go through the LMN qualification process in order to qualify for HSA/FSA reimbursement.

*Truemed is for qualified customers. HSA/FSA tax savings vary. Learn more at truemed.com/disclosures.

For businesses that have a custom API build, meaning they don't rely on an out-of-the-box D2C storefront service like Shopify, HSA/FSA subscription payments may be possible natively.

This means your customers can pay with their HSA/FSA card directly at checkout and have that card charged monthly, just like a standard credit or debit card would be charged. This is a much more straightforward solution for customers and is typically preferred by businesses that are set up to accept payments this way.

If your product suite is made up of dual-purpose items (meaning items that need additional documentation to prove HSA/FSA eligibility), you will still likely need a service like Truemed to facilitate the qualification process. That means your customers would go through the same survey flow described above, but they would be able to pay directly with their HSA/FSA card at checkout instead of going through the reimbursement process.

The important thing to remember is that even for businesses that can accept HSA/FSA subscriptions natively, there are still challenges that need to be mitigated in order to avoid lapsed payments. We'll dive into those below.

Even businesses with a custom storefront that can accept HSA/FSA cards directly aren't in the clear. Native acceptance solves the checkout problem, but it doesn't solve the renewal problem.

Imagine a customer subscribing to a monthly supply of a medically necessary supplement like vitamin D.

They complete their checkout using their HSA/FSA card and their subscription begins.

From there, every renewal follows a similar process:

• The renewal date arrives.
• The billing platform attempts the next payment.
• Eligibility requirements are reviewed where necessary.
• The payment succeeds or fails.
• The next shipment is released.

When everything works your customers barely think about the renewal. They’re just happy to receive their treatment like clockwork. However, when payment declines or an expired LMN interrupts the subscription, the experience can quickly become frustrating. Not to mention the potential lost sales.

That’s why so many ecommerce businesses automate recurring billing alongside compliance checks instead of treating them as separate processes.

So what should you consider from a compliance perspective?

The biggest difference between one-time purchases and HSA/FSA recurring payments is that compliance doesn't end after checkout. Unlike one-time purchases, HSA/FSA subscription compliance requires ongoing eligibility management.

Every renewal depends on the customer still meeting the requirements for using HSA/FSA funds which is typically a valid LMN.

As subscriptions grow, manually tracking payment methods, documentation, and eligibility quickly becomes difficult. Without the right system, you’ll spend more time chasing paperwork and resolving failed renewals instead of growing the business.

That’s where dedicated healthcare providers can help. The right partner can automate these ongoing checks by managing eligibility verification, LMN documentation workflows, and even recurring payment requirements behind the scenes.

Solutions like Truemed help facilitate the background compliance processes and LMN renewals so businesses that sell dual-purpose products don’t have to stress about eligibility lapses and other issues that may break HSA/FSA subscriptions.

Since subscriptions tend to be more complex than one-time purchases, HSA/FSA subscriptions usually introduce even more challenges. The challenges below apply to businesses charging an HSA/FSA card directly each month (native acceptance). If you're running a reimbursement model instead, your card on file is a standard credit or debit card, so it won't decline for HSA/FSA-specific reasons — but your customer's ability to get reimbursed can still be disrupted by an expired LMN or a depleted balance, so it's worth keeping those two risks in mind either way. Here are some of the most common billing issues you'll encounter with HSA/FSA subscriptions.

A customer has happily received six monthly orders before their payment suddenly declines. Nothing is wrong with the subscription, it’s just that their benefits card simply expired.

To prevent this type of decline, simply set up automated reminders and card update workflows to help keep the payments going.

Many customers don't monitor their available HSA or FSA balance before a renewal. If funds aren't available, the payment may fail even though they still want the product.

In situations like these you want to configure a retry logic through your payment processor and set up proactive notifications to give your customers an opportunity to update their payment details before their subscription is cancelled.

A subscription is only eligible for HSA/FSA payment if the customer has a valid LMN on file. Once an LMN expires, your customer will need to get a new LMN before they can repurchase their subscription item.

Ideally you want to set up a reminder to ensure that your customer gets an updated LMN before their subscription payment fails.

Here you have two options. Send out the reminders so your customers can get their LMN through their own healthcare provider or partner with a payment processor like Truemed to facilitate the LMN acquisition for your customer. If you partner with Truemed, we not only provide a network of healthcare providers and a health survey process baked into your payment flow, we also send reminders to your customers to redo their health survey (before their payment declines).

Unlike HSAs, many FSAs operate on a use-it-or-lose-it basis. If a customer's balance resets before their next renewal, FSA subscription payments may fail even though they intend to continue the subscription. Sending reminders before renewal gives your customers time to update their payment method or confirm their available balance.

Some subscriptions include both eligible and non-eligible products.

The key here is to split the cart to ensure that you don’t create unnecessary compliance risk and a confusing checkout experience all while increasing the probability of declines.

Ideally you want to have a payment processor that manages the split cart handling for you.

Now how do you create a subscription set up that addresses all these challenges?

Building a successful HSA/FSA subscription billing program starts with removing friction before customers encounter it.

But what does that look like? An effective subscription set up includes technology that can:

• Verify eligibility during checkout
• Support recurring subscription billing
• Manage LMNs
• Recover failed payments
• Separate eligible and non-eligible products
• Seamlessly integrate with your ecommerce platform

The less manual intervention required by your team after checkout, the more predictable the subscription experience becomes for both your customers and your internal teams.

An effective subscription set up creates a smoother customer experience but it also helps to combat revenue leakage which can be detrimental to your bottom line.

Every successful subscription business wants the same outcome. More renewals, higher customer lifetime value, predictable revenue, and a subscription system that won’t send your blood pressure into orbit.

HSA/FSA payments can support those goals while also creating additional value for customers.

With HSA/FSA payments, qualified customers can often save an average of 30% compared to paying out of pocket, depending on their tax rate. Instead of offering discounts that eat into margins, you can preserve your pricing while your customers benefit from greater purchasing power.

That increased purchasing power often translates into larger baskets and higher average order values with Truemed merchants seeing an average increase of 22%.

Offering HSA/FSA payments also expands your potential customer base. Nearly 45% of Americans have access to HSA or FSA funds, representing roughly $159 billion in healthcare spending.

Offering HSA/FSA payments is a no brainer. But how do you choose the best payment processor for your subscription business?

Not every payment platform is designed for recurring healthcare payments. As you compare providers, ask yourself what happens after the first successful order. Can the platform help recover failed renewals? Will it automate compliance as eligibility changes? Can it integrate with your existing subscription platform without requiring custom development?

You want to look for features like:

• Recurring billing support
• Compliance automation
• Flexible APIs
• Shopify and WooCommerce compatibility
• Reporting and reconciliation
• Responsive customer support

It also helps to choose a provider trusted by established health brands.

Take Ancient Nutrition for example. Like many subscription brands, they wanted to grow their revenue without relying on promotions. When speaking to Ancient Nutrition about their experience, Morgan Letteri, Senior Manager for DTC said, “We're really trying to break our promo cycle, and Truemed gives us a lever that isn't a discount code. It's a real benefit that drives higher-value purchases from qualified customers we weren't reaching before.”

More importantly though, they needed a solution that could help them drive conversions and higher order values all while relieving the compliance stress that comes with HSA/FSA subscription payments.

After partnering with Truemed, they saw a whopping 54% increase in AOV with more than half their sales coming from new customers. The gains didn’t stop there. They also saw 57% net-new customers with a 150% AOV increase in the first five months.

These amazing results are in part due to our marketplace. At Truemed we go a step further by connecting you with a dedicated HSA/FSA marketplace, helping you reach shoppers who are already looking for eligible products. Ancient Nutrition experienced this benefit first hand with about one in five of their HSA/FSA orders coming from our marketplace.

Whether you're launching or expanding HSA/FSA ecommerce subscription payments, choosing the right platform can reduce compliance risk while creating a smoother customer experience and boosting your revenue.