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Brand Building: How to Get Your Products on the HSA/FSA Eligible List

In order to accept HSA and FSA payments you need to get your product or service on the Eligible Product List ✅. Read our guide to find out how to do this.

March 20, 2024
Sam O'Keefe
Co-founder & CEO of Flex
Flex - How to Get Your Products on the HSA/FSA Eligible List
Flex - How to Get Your Products on the HSA/FSA Eligible List

Overview

Overview

Overview

Follow our blueprint to tap into this $120B market

You’ve determined you want to make your product or service HSA and FSA-eligible (a wise decision considering these represent a $120+ billion with a “b” market). Great!

So how do you do it?

In this guide, we outline the steps and resources necessary to qualify, from defining terminology to breaking down the industry guidelines to when, where and how to apply.

What We’ll Cover About Making Your Products HSA/FSA Eligible

  1. What are HSA/FSA-Eligible Items?

  2. What is SIGIS?

  3. What is an IIAS?

  4. What is the Eligible Product List?

  5. Determining if your product should be submitted to the EPL

  6. How to get your product on the EPL

  7. Common mistakes

  8. Important dates and deadlines

  9. How Flex can help?

What are HSA/FSA-Eligible Items?

According to the IRS, eligible Health Savings Account (HSA) and Flexible Spending Account (FSA) items are defined as qualified medical care expenses which “must be primarily to alleviate or prevent a physical or mental disability or illness”. This includes things like annual doctor’s visits, lab fees, prescription medications, and eyeglasses, among many other items.

However, when it comes to wellness, fitness, nutrition, and other health-related products or services — items which may not be on the standard qualifying list — consumers may still be able to use their HSA or FSA

That’s because the IRS allows doctors and medical professionals to recommend individualized interventions as long as they meet the criteria of diagnosis, cure, mitigation, treatment, or prevention of a specific medical condition. To qualify certain purchases for HSA or FSA spending, a doctor needs to write a Letter of Medical Necessity, or LOMN, which deems a product or service medically necessary for a patient. 

So, even if your item or service does not fall under the standard IRS guidelines, consumers may still be able to pay for them with their HSA or FSA.

If you do want to become outright eligible, though, one of the easiest ways to get set up is by registering and complying with SIGIS.

What is SIGIS?

The Special Interest Group for IIAS Standards (SIGIS) is a non-profit that helps craft the industry standard to meet IRS requirements.

In their words, "This standard enables Flexible Spending Account (FSA) and Health Saving Account (HSA) debit cards to be accepted at participating merchants by communicating the dollar amount of the eligible health care items to their benefit plan administrator for approval."

They work with benefit plan administrators, merchants, and other SIGIS Members to create best practices, guidelines, and recommendations to help members become and stay FSA, HRA and HSA compliant. 

If SIGIS clarifies which items qualify for HSA and FSA spending at an industry level (the Eligible Product List), an IIAS is a tool that actually allows items to be purchased at the point of sale at the consumer level. We will talk about IIAS next.

What is an IIAS?

IIAS stands for Inventory Information Approval System. Essentially, it is a validation technology that pharmacies, grocery stores, retailers and ecommerce businesses are required to have in order to verify that purchases made with an HSA or FSA debit card are for eligible medical expenses.

This system reviews the inventory control information (e.g., UPC or SKU number) of the items being purchased against a pre-established list of eligible medical products, the SIGIS Eligible Product List (which we’ll talk about next). If an item does not qualify as an eligible medical expense, consumers will not be able to use their HSA/FSA card.

Do I need an IIAS?

The short answer is, if you are a brand, retailer or service provider and intend to accept HSA/FSA debit cards, then yes, you will need an IIAS

Traditionally, HSAs and FSAs were used to cover expenses at doctor’s office, hospitals, pharmacies, dentists, vision care offices, and other medical care providers. These institutions by default have merchant category codes related to health care. 

Cutting to the chase, in order to accept HSA or FSA cards, merchants must have an eligible MCC or 90% registration (more below). 

Ah, excuse me? 

What are merchant category codes (MCCs)? 

(We know, a lot of acronyms 😅)

An MCC classifies the type of goods or services a business offers for tax reporting purposes. They are four-digit numbers that are key for payment processing. 

Health care-related MCCs tell card networks that your products and services are directly related to the medical needs of patients. 

Here are some health-related MCC examples:

5975 – Hearing Aids-Sales, Service, Supply Stores
5976 – Orthopedic Goods-Artificial Limb Stores
8021 – Dentists, Orthodontists
8041 – Chiropractors
8043 – Opticians, Optical Goods, and Eyeglasses
8071 – Dental and Medical Laboratories
8099 – Health Practitioners, Medical Services-not elsewhere classified

In other words, as a non-health care institution, you need to have an eligible MCC and a way to substantiate purchases (an IIAS).

The exception: 90% rule

You may have come across the 90% Rule in your research, but it most likely doesn’t apply to your ecommerce or wellness business. 

This route is only for drug stores and pharmacies and allows them to register with SIGIS as a 90% merchant if they meet the IRS requirement that >90% of their store’s gross receipts consist of items which qualify as medical expenses. Again, this is ONLY for pharmacies and drug stores with specific MCC codes.

What is the Eligible Product List (EPL)?

Developed by SIGIS, the industry-vetted Eligible Product List comprises health care/medical products that qualify for purchase with an FSA or HSA debit card. It is continually updated and reviewed by benefit plan administrators, merchants, and other SIGIS Members.

SIGIS also publishes general guidelines for potential members to review to determine whether they should submit or not. Merchants can see the categories of items that are considered:

  • Eligible

  • Not eligible: Products that are strictly for general health, cosmetic, or personal hygiene purposes)

  • Dual-purpose: Products that have both a medical and personal hygiene, cosmetic or general health purpose, and which are therefore not considered eligible by the IRS 

The publication also provides rationale for why some products are eligible and others are not.

Note that the exact list is only published to SIGIS member organizations and is used by IIAS providers to validate eligible products.

Determining if Your Product Should Be Submitted to the EPL

Before applying to the EPL, consider if your product is a health care or medical-related item. The IRS publication outlines specific HSA and FSA eligible items, including most over-the-counter products found at pharmacies, like cold medicines, menstrual products, thermometers, and at-home COVID-19 test kits. Recent additions include certain wearable devices with medical purposes and at-home lab testing kits, along with accessories like charging stations or refillable components.

If you aren't sure or would like guidance, reach out to the Flex team and we’ll help you get setup.

What about subscriptions or memberships?

The eligibility for subscriptions or memberships — such as software apps that are necessary for using a medical or health care device — is determined by SIGIS and their review committees. These committees interpret IRS guidelines to decide product eligibility. 

Subscriptions may be considered if they are necessary to use a medical or health care device or serve a medical purpose themselves. For example, say a blood pressure cuff submits readings to an app and that app is the only way to access the blood pressure information. In these cases, the app and subsequent subscription may be considered for the Eligible Product List.

(Note that this is a newer category that SIGIS is evaluating so the criteria and evaluation process is a work in progress.)

Now that you’ve determined that your product or service qualifies, here are the steps to submit to the EPL.

How to Get Your Product on the EPL:

The process begins by becoming a member of SIGIS. Completing an application form on their website and paying the membership fee.

  1. In your member portal, you'll find options to submit your product to the EPL, either manually or by uploading a CSV file, the latter being useful for multiple products.

  2. For each product, you'll need to provide a 14-digit GTIN, a UPC code, the product's name, a rationale for its addition, the product URL, and a fine line code, which categorizes your submission. SIGIS offers a reference document to help identify the correct fine line code.

  3. Complete your submission. SIGIS reviews submissions monthly and releases an updated EPL the following month.

Common mistakes when submitting your product to the EPL

The most common mistake when submitting to the Eligible Product List is not including a thorough rationale explaining how your product treats or manages a medical condition.

This information must help the committee understand the how and why your product or service 

should be considered a qualified medical expense. Remember that medical expenses “are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body,” according to the IRS. 

Be sure to review similar products and services on the EPL as the publication provides explanations for why some products are eligible and others are not.

Important dates and deadlines

In your SIGIS member portal, the submission dates and EPL release dates will be published. You want to pay attention to the deadlines to ensure that your products are considered in a timely manner.

We’ve included the 2024 dates here for your reference:

flex sigis important dates and deadlines
flex sigis important dates and deadlines
flex sigis important dates and deadlines

Your HSA and FSA Partner: How Flex Can Help

As you can imagine, there is a lot of nuance when applying to the EPL, and understanding past precedent and best practices helps. 

If you're listed in the Flex Market or use Flex for processing FSA and HSA payments, we, as a SIGIS member, can submit your products on your behalf. Contact Flex if you’d like them to handle your EPL submission.

Follow our blueprint to tap into this $120B market

You’ve determined you want to make your product or service HSA and FSA-eligible (a wise decision considering these represent a $120+ billion with a “b” market). Great!

So how do you do it?

In this guide, we outline the steps and resources necessary to qualify, from defining terminology to breaking down the industry guidelines to when, where and how to apply.

What We’ll Cover About Making Your Products HSA/FSA Eligible

  1. What are HSA/FSA-Eligible Items?

  2. What is SIGIS?

  3. What is an IIAS?

  4. What is the Eligible Product List?

  5. Determining if your product should be submitted to the EPL

  6. How to get your product on the EPL

  7. Common mistakes

  8. Important dates and deadlines

  9. How Flex can help?

What are HSA/FSA-Eligible Items?

According to the IRS, eligible Health Savings Account (HSA) and Flexible Spending Account (FSA) items are defined as qualified medical care expenses which “must be primarily to alleviate or prevent a physical or mental disability or illness”. This includes things like annual doctor’s visits, lab fees, prescription medications, and eyeglasses, among many other items.

However, when it comes to wellness, fitness, nutrition, and other health-related products or services — items which may not be on the standard qualifying list — consumers may still be able to use their HSA or FSA

That’s because the IRS allows doctors and medical professionals to recommend individualized interventions as long as they meet the criteria of diagnosis, cure, mitigation, treatment, or prevention of a specific medical condition. To qualify certain purchases for HSA or FSA spending, a doctor needs to write a Letter of Medical Necessity, or LOMN, which deems a product or service medically necessary for a patient. 

So, even if your item or service does not fall under the standard IRS guidelines, consumers may still be able to pay for them with their HSA or FSA.

If you do want to become outright eligible, though, one of the easiest ways to get set up is by registering and complying with SIGIS.

What is SIGIS?

The Special Interest Group for IIAS Standards (SIGIS) is a non-profit that helps craft the industry standard to meet IRS requirements.

In their words, "This standard enables Flexible Spending Account (FSA) and Health Saving Account (HSA) debit cards to be accepted at participating merchants by communicating the dollar amount of the eligible health care items to their benefit plan administrator for approval."

They work with benefit plan administrators, merchants, and other SIGIS Members to create best practices, guidelines, and recommendations to help members become and stay FSA, HRA and HSA compliant. 

If SIGIS clarifies which items qualify for HSA and FSA spending at an industry level (the Eligible Product List), an IIAS is a tool that actually allows items to be purchased at the point of sale at the consumer level. We will talk about IIAS next.

What is an IIAS?

IIAS stands for Inventory Information Approval System. Essentially, it is a validation technology that pharmacies, grocery stores, retailers and ecommerce businesses are required to have in order to verify that purchases made with an HSA or FSA debit card are for eligible medical expenses.

This system reviews the inventory control information (e.g., UPC or SKU number) of the items being purchased against a pre-established list of eligible medical products, the SIGIS Eligible Product List (which we’ll talk about next). If an item does not qualify as an eligible medical expense, consumers will not be able to use their HSA/FSA card.

Do I need an IIAS?

The short answer is, if you are a brand, retailer or service provider and intend to accept HSA/FSA debit cards, then yes, you will need an IIAS

Traditionally, HSAs and FSAs were used to cover expenses at doctor’s office, hospitals, pharmacies, dentists, vision care offices, and other medical care providers. These institutions by default have merchant category codes related to health care. 

Cutting to the chase, in order to accept HSA or FSA cards, merchants must have an eligible MCC or 90% registration (more below). 

Ah, excuse me? 

What are merchant category codes (MCCs)? 

(We know, a lot of acronyms 😅)

An MCC classifies the type of goods or services a business offers for tax reporting purposes. They are four-digit numbers that are key for payment processing. 

Health care-related MCCs tell card networks that your products and services are directly related to the medical needs of patients. 

Here are some health-related MCC examples:

5975 – Hearing Aids-Sales, Service, Supply Stores
5976 – Orthopedic Goods-Artificial Limb Stores
8021 – Dentists, Orthodontists
8041 – Chiropractors
8043 – Opticians, Optical Goods, and Eyeglasses
8071 – Dental and Medical Laboratories
8099 – Health Practitioners, Medical Services-not elsewhere classified

In other words, as a non-health care institution, you need to have an eligible MCC and a way to substantiate purchases (an IIAS).

The exception: 90% rule

You may have come across the 90% Rule in your research, but it most likely doesn’t apply to your ecommerce or wellness business. 

This route is only for drug stores and pharmacies and allows them to register with SIGIS as a 90% merchant if they meet the IRS requirement that >90% of their store’s gross receipts consist of items which qualify as medical expenses. Again, this is ONLY for pharmacies and drug stores with specific MCC codes.

What is the Eligible Product List (EPL)?

Developed by SIGIS, the industry-vetted Eligible Product List comprises health care/medical products that qualify for purchase with an FSA or HSA debit card. It is continually updated and reviewed by benefit plan administrators, merchants, and other SIGIS Members.

SIGIS also publishes general guidelines for potential members to review to determine whether they should submit or not. Merchants can see the categories of items that are considered:

  • Eligible

  • Not eligible: Products that are strictly for general health, cosmetic, or personal hygiene purposes)

  • Dual-purpose: Products that have both a medical and personal hygiene, cosmetic or general health purpose, and which are therefore not considered eligible by the IRS 

The publication also provides rationale for why some products are eligible and others are not.

Note that the exact list is only published to SIGIS member organizations and is used by IIAS providers to validate eligible products.

Determining if Your Product Should Be Submitted to the EPL

Before applying to the EPL, consider if your product is a health care or medical-related item. The IRS publication outlines specific HSA and FSA eligible items, including most over-the-counter products found at pharmacies, like cold medicines, menstrual products, thermometers, and at-home COVID-19 test kits. Recent additions include certain wearable devices with medical purposes and at-home lab testing kits, along with accessories like charging stations or refillable components.

If you aren't sure or would like guidance, reach out to the Flex team and we’ll help you get setup.

What about subscriptions or memberships?

The eligibility for subscriptions or memberships — such as software apps that are necessary for using a medical or health care device — is determined by SIGIS and their review committees. These committees interpret IRS guidelines to decide product eligibility. 

Subscriptions may be considered if they are necessary to use a medical or health care device or serve a medical purpose themselves. For example, say a blood pressure cuff submits readings to an app and that app is the only way to access the blood pressure information. In these cases, the app and subsequent subscription may be considered for the Eligible Product List.

(Note that this is a newer category that SIGIS is evaluating so the criteria and evaluation process is a work in progress.)

Now that you’ve determined that your product or service qualifies, here are the steps to submit to the EPL.

How to Get Your Product on the EPL:

The process begins by becoming a member of SIGIS. Completing an application form on their website and paying the membership fee.

  1. In your member portal, you'll find options to submit your product to the EPL, either manually or by uploading a CSV file, the latter being useful for multiple products.

  2. For each product, you'll need to provide a 14-digit GTIN, a UPC code, the product's name, a rationale for its addition, the product URL, and a fine line code, which categorizes your submission. SIGIS offers a reference document to help identify the correct fine line code.

  3. Complete your submission. SIGIS reviews submissions monthly and releases an updated EPL the following month.

Common mistakes when submitting your product to the EPL

The most common mistake when submitting to the Eligible Product List is not including a thorough rationale explaining how your product treats or manages a medical condition.

This information must help the committee understand the how and why your product or service 

should be considered a qualified medical expense. Remember that medical expenses “are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body,” according to the IRS. 

Be sure to review similar products and services on the EPL as the publication provides explanations for why some products are eligible and others are not.

Important dates and deadlines

In your SIGIS member portal, the submission dates and EPL release dates will be published. You want to pay attention to the deadlines to ensure that your products are considered in a timely manner.

We’ve included the 2024 dates here for your reference:

flex sigis important dates and deadlines

Your HSA and FSA Partner: How Flex Can Help

As you can imagine, there is a lot of nuance when applying to the EPL, and understanding past precedent and best practices helps. 

If you're listed in the Flex Market or use Flex for processing FSA and HSA payments, we, as a SIGIS member, can submit your products on your behalf. Contact Flex if you’d like them to handle your EPL submission.

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.