HSA/FSA

Why Accepting HSA/FSA Payments Will Help Grow Your Business

Accepting HSA and FSA payments lets your brand tap into a $120 billion market. For ecommerce health product and services companies it’s a huge opportunity.

March 28, 2024
Sam O'Keefe
Co-founder & CEO of Flex
Flex - Benefits of Accepting HSA/FSA Payments
Flex - Benefits of Accepting HSA/FSA Payments

Overview

Overview

Overview

What if you could unlock a $120B market for your business? For ecommerce health product and services companies, accepting Health Savings Account (HSA) and Flexible Spending Account (FSA) payments allows you to do just that.

Here’s why you should care:

  • Wealthy contributors: The majority of people who contribute to their HSA have incomes over $200,000 per year.

  • Rapidly growing: Between 2017 and 2022, HSA accounts grew by 60%, reaching 36 million accounts and covering 60 million people. 

  • Tax incentive to use HSAs and FSAs: Consumers, on average, save 30 to 40% on purchases they make with their accounts.

The calculus is clear: By accepting HSA/FSA payments, you can align consumer motivations for a healthier lifestyle with cost savings. 

Read on to learn about these health savings accounts, why they are becoming more popular, and how they can boost sales for D2C health care-related products and services.

  1. For Flex partners, 17% of sales are made through HSA/FSA payments

  2. AOV for HSA/FSA orders are 20% higher than standard orders

  3. 61.5% of Flex survey respondents said that the availability of HSA/FSA payment options is “very important” when making a health or wellness-related purchase.

What We’ll Cover About Why Accepting HSA/FSA Payments Will Help Grow Your Business

  1. What are Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)?

  2. Cost savings for consumers

  3. Why should your business consider accepting HSA/FSA?

  4. A growing market

  5. Who is signing up for HSAs and FSAs?

  6. How to accept HSA and FSA payments

What are Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)?

HSAs and FSAs are tax-advantaged financial accounts set up exclusively for health-related expenses. They are not health insurance, but rather complementary savings accounts that let consumers put money away for future medical fees while also reducing their taxable income. 

The idea behind these plans is to give consumers more control over their out-of-pocket healthcare spending. This is because they can put money towards items that might not typically be covered by health insurance — think fitness and sleep trackers, at-home genetic or metabolic tests, smart baby monitors, and a whole range of other consumer-focused products.

Cost savings for consumers

The average American spends nearly $6,000 a year on out-of-pocket health-care costs, according to the latest consumer spending data from the Bureau of Labor Statistics. Expenses include things like insurance, elective surgeries, prescriptions and medical supplies. 

This helps put potential cost-savings in perspective. 

Since consumers aren't being taxed on the money put into or taken out of their HSA or FSA (as long as it’s for a qualified medical expense), they save when they use their account. Another way to look at it, accepting HSA/FSA is like offering customers a 30 to 40% discount, which is important because one of the main reasons consumers abandon their carts is price

That’s what we see as well. From a survey of 100 customers who purchased via Flex in 2023, nearly 70% of respondents said “it allowed me to afford the purchase” when asked about their primary motivation for using their HSA/FSA card. 

In real money terms, by using an HSA, the average person could save $955 on taxes in a single year and up to $1,909 for the whole family.

Why Should Your Business Consider Accepting HSA/FSA?

As an ecommerce health company, the motivation is aligned for you and your customer: You both want to improve health outcomes by addressing a specific medical condition ahead of time, before more expensive treatments are needed. And for consumers, they are able to save money on their purchases by using their HSA or FSA.

A growing trend: Good for brands

HSAs and FSAs have undergone rapid growth since they were introduced (in 2003 and 1978, respectively). 

This trend is being driven for a few reasons:

  1. More employers are moving to high-deductible health plan (HDHP) which are commonly paired with an HSA.

  2. Consumers are using these accounts as investment vehicles to help cover rising health care costs in retirement and to save money on present day out-of-pocket health-related expenses.

  3. Growing awareness of the accounts themselves along with the flexibility and opportunities they provide.

Consider that consumers are taking a more preventative approach to their health and this means there is a growing pool of money designated specifically for health care-related products and services.

Who is signing up for HSAs and FSAs?

According to a CNBC/Morning Consult survey from 2019, 60% of HSA owners are between the ages of 18-54, with Millenials and Gen Xers making up the bulk. These are the generations who make up the majority of purchasing power today.

Of those who make contributions to HSAs, about 6% make less than $75,000 per year, while roughly 25% have yearly incomes over $100,000. While higher income individuals are investing their HSA funds, the average American with an HSA spends about 96% of their contributions on qualified expenses each year.

In other words, it’s reasonable to say that most HSA holders are using their accounts to reduce costs for health care-related expenses. And consumers want to be able to use their funds with merchants: According to our 2023 survey, 92% of respondents said they are likely to shop at a merchant again if they accept HSA/FSAs.

Ready to Accept HSA and FSA Payments?

HSA/FSAs can only be spent at medical institutions and retailers that have specific inventory management systems in place to comply with IRS regulations. As a result, many consumer wellness, fitness, nutrition, and e-commerce companies selling health-related products are not able to accept HSA/FSAs. 

To become eligible is not rocket science, but it is a bit complicated — and too much to cover here. Luckily, we have a whole other article about how to get your products on the HSA/FSA eligible list.

Unlock Healthcare Spending by Accepting HSA/FSA Payments

You started your business to help people live healthier lives. Meanwhile, HSAs and FSAs allow  customers to be proactive about their health by investing in products and services that can reduce or prevent medical issues before they happen. 

If you want to make purchasing your product easier, your customer happier, and boost revenue too, accepting HSA and FSA payments is a win-win for healthier and more economic health care decisions.

Read more: How Hyper Arch Motion Grew Their AOV By 20% By Accepting HSA Payments

What if you could unlock a $120B market for your business? For ecommerce health product and services companies, accepting Health Savings Account (HSA) and Flexible Spending Account (FSA) payments allows you to do just that.

Here’s why you should care:

  • Wealthy contributors: The majority of people who contribute to their HSA have incomes over $200,000 per year.

  • Rapidly growing: Between 2017 and 2022, HSA accounts grew by 60%, reaching 36 million accounts and covering 60 million people. 

  • Tax incentive to use HSAs and FSAs: Consumers, on average, save 30 to 40% on purchases they make with their accounts.

The calculus is clear: By accepting HSA/FSA payments, you can align consumer motivations for a healthier lifestyle with cost savings. 

Read on to learn about these health savings accounts, why they are becoming more popular, and how they can boost sales for D2C health care-related products and services.

  1. For Flex partners, 17% of sales are made through HSA/FSA payments

  2. AOV for HSA/FSA orders are 20% higher than standard orders

  3. 61.5% of Flex survey respondents said that the availability of HSA/FSA payment options is “very important” when making a health or wellness-related purchase.

What We’ll Cover About Why Accepting HSA/FSA Payments Will Help Grow Your Business

  1. What are Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)?

  2. Cost savings for consumers

  3. Why should your business consider accepting HSA/FSA?

  4. A growing market

  5. Who is signing up for HSAs and FSAs?

  6. How to accept HSA and FSA payments

What are Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)?

HSAs and FSAs are tax-advantaged financial accounts set up exclusively for health-related expenses. They are not health insurance, but rather complementary savings accounts that let consumers put money away for future medical fees while also reducing their taxable income. 

The idea behind these plans is to give consumers more control over their out-of-pocket healthcare spending. This is because they can put money towards items that might not typically be covered by health insurance — think fitness and sleep trackers, at-home genetic or metabolic tests, smart baby monitors, and a whole range of other consumer-focused products.

Cost savings for consumers

The average American spends nearly $6,000 a year on out-of-pocket health-care costs, according to the latest consumer spending data from the Bureau of Labor Statistics. Expenses include things like insurance, elective surgeries, prescriptions and medical supplies. 

This helps put potential cost-savings in perspective. 

Since consumers aren't being taxed on the money put into or taken out of their HSA or FSA (as long as it’s for a qualified medical expense), they save when they use their account. Another way to look at it, accepting HSA/FSA is like offering customers a 30 to 40% discount, which is important because one of the main reasons consumers abandon their carts is price

That’s what we see as well. From a survey of 100 customers who purchased via Flex in 2023, nearly 70% of respondents said “it allowed me to afford the purchase” when asked about their primary motivation for using their HSA/FSA card. 

In real money terms, by using an HSA, the average person could save $955 on taxes in a single year and up to $1,909 for the whole family.

Why Should Your Business Consider Accepting HSA/FSA?

As an ecommerce health company, the motivation is aligned for you and your customer: You both want to improve health outcomes by addressing a specific medical condition ahead of time, before more expensive treatments are needed. And for consumers, they are able to save money on their purchases by using their HSA or FSA.

A growing trend: Good for brands

HSAs and FSAs have undergone rapid growth since they were introduced (in 2003 and 1978, respectively). 

This trend is being driven for a few reasons:

  1. More employers are moving to high-deductible health plan (HDHP) which are commonly paired with an HSA.

  2. Consumers are using these accounts as investment vehicles to help cover rising health care costs in retirement and to save money on present day out-of-pocket health-related expenses.

  3. Growing awareness of the accounts themselves along with the flexibility and opportunities they provide.

Consider that consumers are taking a more preventative approach to their health and this means there is a growing pool of money designated specifically for health care-related products and services.

Who is signing up for HSAs and FSAs?

According to a CNBC/Morning Consult survey from 2019, 60% of HSA owners are between the ages of 18-54, with Millenials and Gen Xers making up the bulk. These are the generations who make up the majority of purchasing power today.

Of those who make contributions to HSAs, about 6% make less than $75,000 per year, while roughly 25% have yearly incomes over $100,000. While higher income individuals are investing their HSA funds, the average American with an HSA spends about 96% of their contributions on qualified expenses each year.

In other words, it’s reasonable to say that most HSA holders are using their accounts to reduce costs for health care-related expenses. And consumers want to be able to use their funds with merchants: According to our 2023 survey, 92% of respondents said they are likely to shop at a merchant again if they accept HSA/FSAs.

Ready to Accept HSA and FSA Payments?

HSA/FSAs can only be spent at medical institutions and retailers that have specific inventory management systems in place to comply with IRS regulations. As a result, many consumer wellness, fitness, nutrition, and e-commerce companies selling health-related products are not able to accept HSA/FSAs. 

To become eligible is not rocket science, but it is a bit complicated — and too much to cover here. Luckily, we have a whole other article about how to get your products on the HSA/FSA eligible list.

Unlock Healthcare Spending by Accepting HSA/FSA Payments

You started your business to help people live healthier lives. Meanwhile, HSAs and FSAs allow  customers to be proactive about their health by investing in products and services that can reduce or prevent medical issues before they happen. 

If you want to make purchasing your product easier, your customer happier, and boost revenue too, accepting HSA and FSA payments is a win-win for healthier and more economic health care decisions.

Read more: How Hyper Arch Motion Grew Their AOV By 20% By Accepting HSA Payments

Flex is a modern marketplace for consumers to discover and purchase HSA/FSA eligible products. From fitness and nutrition, to sleep and mental health, Flex takes a holistic view of healthcare and enables consumers to use their pre-tax money to do the same.