Letter of Medical Necessity for Ecommerce Businesses: A Complete Guide to HSA/FSA Compliance

Nearly half of Americans have access to HSA or FSA funds, representing more than $170 billion in healthcare spending power. Yet many ecommerce brands unknowingly make it difficult for customers to use those funds.

One of the biggest points of confusion is the Letter of Medical Necessity, often called an LMN. Customers may not know when one is required and merchants may be unsure of their compliance obligations. This confusion can cause both parties to abandon the HSA/FSA route when the process feels complicated.

Understanding how LMNs work can help ecommerce businesses unlock additional revenue, improve conversion rates, and expand access to HSA/FSA spending for eligible products. For brands selling fitness, sleep, recovery, or nutrition products, it can also open the door to customers who are actively looking for ways to spend pre-tax healthcare dollars.

This guide explains what a Letter of Medical Necessity is, when it's required, how it fits into modern HSA/FSA ecommerce workflows, and what merchants need to know to remain compliant.

Many products sit in a gray area between healthcare and general health.

A sleep supplement might help someone manage a diagnosed condition but that same product could also be purchased by someone simply trying to improve their nightly routine. From a compliance perspective, those situations are very different and in this case, the sleep supplement would be considered a dual-use product.

An LMN helps establish whether a dual-use product or service is a qualifying medical expense. This document is issued by a licensed healthcare provider to state that your product or service is being recommended to treat, manage, or prevent a specific medical condition.

The LMN is a crucial component for HSA/FSA compliance and without it your customers could face penalties from the IRS or third-party administrators.

When it comes to better approval rates, a compliant LMN is critical. Requirements may vary slightly depending on the administrator, but most letters include:

• The patient's medical condition
• A recommendation for a specific product or category of products
• An explanation of how the product supports treatment or management of the condition
• The healthcare provider's information and signature
• The date of issuance

The goal is to provide documentation showing that the purchase meets HSA/FSA eligibility requirements.

An LMN must be issued by a licensed healthcare provider authorized to diagnose and treat medical conditions.

Depending on the situation, this may include physicians, nurse practitioners, physician assistants, or other qualified healthcare professionals.

As a merchant, you can’t issue LMNs on behalf of your customers but you can partner with a company like Truemed* to facilitate the LMN acquisition through a network of independent licensed medical providers.

*Truemed is for qualified customers. See terms at truemed.com/disclosures.

A Letter of Medical Necessity for ecommerce business workflows can significantly expand the range of products customers can purchase using pre-tax healthcare funds.

Many health, fitness, sleep, recovery, and nutritional products fall into the dual-purpose category. Without an LMN, customers aren’t able to use HSA/FSA funds for these purchases.

This matters because HSA/FSA accounts represent a massive consumer spending opportunity. Nearly half of Americans have access to an HSA or FSA, representing billions of dollars in healthcare purchasing power.

When customers can use pre-tax funds, their effective spending power increases. Rather than relying on after-tax income, they can purchase eligible products using money that has not been subject to federal income taxes. For many shoppers, this translates into meaningful savings without merchants needing to offer discounts.

LMNs also play an important role in conversion optimization. Customers who know they can use HSA/FSA funds are often more willing to complete purchases and may be less sensitive to price when the product addresses a legitimate health need.

Dual-purpose products are items that may support general wellness but can also be used to treat, manage, or prevent a specific medical condition.

For example, a fitness program might be prescribed by a physician to treat obesity but that same fitness program may also be used by a customer looking to prepare for a Hyrox event or a marathon.

Because these products serve both medical and non-medical purposes, an LMN for HSA FSA purchases is required to demonstrate that the product is being used to treat, manage, or prevent a medical condition.

This is usually where confusion pops up because shoppers don’t know whether their purchase is a qualifying expense. This is also where you’re likely to lose a sale if you don't have proper customer education, product tagging, and an efficient LMN flow set up.

Some common dual-use ecommerce examples include:

• Exercise and fitness programs
• Recovery and rehabilitation products
• Certain nutritional supplements
• Sleep-related products like mattresses
• Weight management solutions
• Health coaching programs

There are two primary ways LMNs are used within HSA/FSA ecommerce experiences.

Imagine a customer spends $300 on an eligible health product expecting to use their FSA/HSA funds. After the purchase, they discover they need additional documentation before they can be reimbursed. Now they're stuck searching for eligibility requirements, trying to figure out whether they purchased the right product and whether they’re even eligible for a reimbursement in the first place.

Under the traditional model, your customers purchase a product using their personal funds and then submit documentation to their HSA or FSA administrator for reimbursement.

But this model tends to create opportunities for confusion which increases the demand for customer support. And that assumes that your customers will reach out to support to clear up confusion. Many customers don’t reach out, especially if they find a competing product with an easier checkout flow.

An integrated eligibility assessment model is really the gold standard for HSA/FSA purchases. Rather than forcing customers to navigate eligibility requirements on their own, this model guides shoppers through an eligibility assessment during the purchasing journey.

When needed, your customers are connected with licensed clinicians who can evaluate whether an LMN is medically justified.

This creates a smoother customer experience while helping you access the HSA/FSA goldmine.

For ecommerce brands, the result is often higher conversion rates, larger average order values, and access to a growing audience actively looking for HSA/FSA-eligible products.

Take Heavenly Heat Saunas for example. They’re a leading sauna manufacturing company who has been in the business since 1988, selling the cleanest saunas on the market. They pride themselves on selling saunas made of solid Canadian hemlock that are free of glue and synthetic materials. But that kind of quality comes at a price.

With their saunas running from $4,000 all the way up to $17,700, their customers consistently contacted them to find out how they can save with HSA/FSA.

That’s when they realized they needed to partner with Truemed.

We sat down with Warren Lentz, the CEO of Heavenly Heat Saunas, and here’s what he had to say about enabling HSA/FSA payments, “Before being on Truemed, we were getting questions on a weekly basis from customers that wanted to buy our sauna with their HSA FSA account. We didn’t really fully know, okay, how can we reduce friction for them? What do we say? But after a couple months of consistent customers that wanted to get on average 30% savings, you know, our $10,000 sauna for $7,000 for them, that's when we were like, ‘Okay, we need to get on Truemed to let them have access to this.’”

After partnering with Truemed to enable HSA/FSA payments on their site, Heavenly Heat Saunas saw nearly a million dollars of GMV directly from Truemed.com.

An integrated eligibility assessment model like the one we offer at Truemed removes the friction from your checkout flow making it easier for your customers to get the treatment they need at a lower cost.

Many merchants assume they need to collect and store medical documentation themselves. The reality is that most ecommerce teams have no desire to become custodians of sensitive healthcare records. Thankfully, your main responsibility as a merchant is to provide compliant purchasing flows to your customers. This is to say you’ll need to ensure that you provide itemized receipts that your customer can submit with their LMN for reimbursement (and the IRS should they get audited).

The responsibility for issuing LMNs belongs solely to qualified healthcare providers but you can facilitate the process by adding a LMN acquisition step to your checkout flow.

You can also store LMNs as a back up for your customers but the main responsibility for storing LMNs lies with the customer and their third-party administrator.

Think of what happens when your customer can use pre-tax dollars instead of money from their checking account. When using an HSA/FSA card, a $200 purchase no longer feels like a $200 purchase. And your customers start to evaluate their purchases differently than they would if they were paying out of pocket.

This shift in a consumer's mindset can influence whether they make the purchase, which product they choose, and ultimately how much they add to their cart. As a business, that increase in purchasing power and willingness to buy higher ticket items often translates into higher conversion rates and larger average order values.

One thing businesses often overlook is the fact that HSA/FSA programs can become a customer acquisition channel. As more consumers actively search for eligible products, businesses that support HSA/FSA spending may gain access to qualified shoppers already looking to buy.

If you’re competing in a crowded market, this can create a meaningful advantage.