Collections & FSA/HSA Payment Processing

Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) have become a popular and effective way for consumers to manager healthcare expenses. As a healthcare collection firm, you want to be able to accept FSA and HSA cards. This capability provides flexible options for the patient and increases collection activity for providers and their agencies.

To make effective use of FSA and HSA accounts, you first need to understand the differences:

  • Flexible Spending Accounts: Introduced in the 1970s, FSAs were established by employers and are funded by employees. They offer substantial tax advantages to employees by allowing payment for qualified medical expenses in pre-tax dollars.

Today, employees receive FSA cards they can use to pay these expenses. According to the IRS, qualified medical expenses consist of “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.”

FSAs eliminate submitting receipts to a plan administrator and waiting for reimbursement. When a patient uses the FSA card to pay a bill, the money is withdrawn and the provider payment automatically satisfied. The amount of the payment is deducted from the employee’s health spending account.

  • Health Savings Account (HSA): HSAs were developed in 2003 as part of the Medicare Prescription Drug Improvement and Modernization Act. Like an FSA, HSAs pays for qualified medical expenses for the account holder and the account holder’s spouse and dependents.

HSAs act as a tax-exempt trust or custodial account. Money used to pay for qualified medical expenses is never taxed. Also, money left in an HSA account earns interest that accumulates tax-deferred. Up to the legal limit, contributions to an HSA are 100% deductible.

HSAs work with high-deductible health insurance plans. The money accumulated in the accounts is used to pay deductibles. After a deductible is met, the insurance plan pays qualified medical expenses.

The law requires HSAs work with high-deductible insurance plans. An employee cannot gain the benefits of an HSA unless he or she has a high-deductible plan.

What’s the difference between an FSA and an HSA? Unlike FSAs, balances in HSA accounts aren’t forfeited at the end of each year. Employees keep the unused money, which continues to earn interest.

How Does FSA and HSA Payment Processing Help Collections?

An effective FSA/HSA payment processing solution will:

  • Eliminate manual payment collections
  • Manage all transactions electronically through secure networks
  • Provide full PCI-compliance
  • Accelerate availability of funds
  • Reduce costs associated with paper check processing
  • Manage all payments through a single portal
  • Create useful reports

Accepting all types of payment cards, including FSA and HSA, provides an added convenience for consumers and increases their payment options. It also creates an efficient way for providers and their collection partners to collect payments. As a result, an increasing number of third party collection companies are adopting FSA/HSA payment processing capabilities. The right solution will offer proven technologies, tools and services to enhance the patient collection process.

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