I Almost Let My FSA Dollars Expire — Until I Learned They Could Cover Therapy

You probably know the feeling: the end of your plan year for your FSA is approaching and you haven’t spent all of your money. So begins the mad scramble to spend all of your dollars before they expire, lest you watch them go down the drain. Or, you could use them to pay for therapy.

The “Use It Or Lose It” rule applies to money that you have contributed to a Flexible Spending Account (FSA). This rule makes it so that these funds will expire if they have not been used by the end of your plan year.

Fortunately, therapy is FSA-eligible, meaning that you can use your FSA dollars to pay for sessions with a licensed therapist. Here is everything you need to know to start.

Breathe that sigh of relief, you don’t have to watch your hard-earned money go to waste, and you can start bettering yourself through therapy with your otherwise-unused FSA dollars.

Can you use FSA for therapy?

Yes, you can use your FSA dollars to pay for sessions or care with a licensed therapist or counselor.

Flexible Spending Accounts (FSAs) allow individuals to set aside pre-tax income for qualified medical expenses. The IRS defines FSA-eligible expenses as those used to “diagnose, cure, mitigate, treat, or prevent disease.” Mental health conditions are recognized as legitimate medical conditions, so therapy, counseling, and psychiatric care qualify just like treatment for physical illnesses. Therapy and counseling are seen as medical services, so when you see a licensed mental health professional, you’re receiving a form of medical treatment.

Over the past decade, U.S. law, especially the Mental Health Parity and Addiction Equity Act, has required that mental health care be treated equally to physical health care in insurance and employer benefits. That’s why FSAs must cover mental health care under the same standards as physical health care under the law.

Additionally, covering mental health care services through FSAs encourages preventative care, helping people to seek care earlier instead of waiting until they’re in crisis. This can both improve health outcomes and reduce long-term costs.

This applies to various types of therapy, including individual therapy, couples therapy, and family therapy, as long as they meet certain standards.

What types of therapy are FSA eligible?

Many types of therapy are FSA-eligible, as long as they meet a few requirements. They must be administered by a licensed mental health professional, and in most cases, the person receiving treatment must have a diagnosed mental health condition. Here are some examples of types of FSA-eligible therapies:

• Individual therapy/counseling: This can be for conditions such as anxiety, depression, trauma, grief, stress, etc.
• Couples or marriage counseling: These types of therapy or counseling are eligible if they are for a diagnosed mental/emotional condition in at least one of the participants. Therapy for more general relationship advice is not FSA-eligible.
• Family therapy: Family therapy is FSA-eligible when tied to a dependent’s mental health treatment. In order for it to meet the standards of eligibility, one or more family members must have a diagnosed mental health condition.
• Group therapy: This type of therapy can be used to treat conditions like addiction, PTSD, or eating disorders, and is FSA-eligible.
• Psychiatric care: FSA dollars can be used to pay for psychiatric visits for evaluation, diagnosis, or treatment of mental conditions, medication management prescribed by a psychiatrist, and psychiatric testing or assessments.
• Teletherapy: Virtual therapy or counseling sessions are covered the same as in-person.

(It’s worth noting that life coaching and wellness coaching usually aren’t covered by an FSA.)

Does FSA cover mental health?

Yes, for FSA purposes, mental health is treated just like physical health, thanks to legislation like the Mental Health Parity and Addiction Equity Act. This law, passed in 2008, requires most health insurance plans in the U.S. to provide mental health and substance use disorder benefits on equal terms with medical/surgical benefits. Since FSAs are employer-sponsored benefits, they are often tied to insurance coverage rules. As a result, mental health services are considered qualified medical expenses for FSAs.

There are a range of mental health services covered by FSA beyond talk therapy, from Psychiatric Care, to Cognitive Behavioral Therapy (CBT) and Dialectical Behavioral Therapy (DBT), to Eye Movement Desensitization and Reprocessing (EMDR) Therapy for trauma.

Psychological testing and assessments are also FSA-eligible. This can include testing for conditions such as ADHD, PTSD, and learning disorders.

Psychiatric visits and medication management are FSA-eligible as well. These include regular visits to a psychiatrist for talk therapy, as well as to prescribe medications for mental health treatment. FSA dollars can also be used to help pay for the psychiatric medications themselves.

What mental health expenses are FSA eligible?

When it comes to mental health, your FSA can stretch further than you might think — but not everything qualifies. Here’s a breakdown of which services and treatments are typically covered, and which ones don’t make the cut.

• Therapy/counseling sessions: These must be conducted with licensed mental health professionals. The person receiving care must be diagnosed with a mental health disorder.
• Psychiatric services: These services include psychiatric visits for things like evaluations, diagnosis, or treatment of mental health conditions. It also includes sessions for medication management.
• Psychological assessments: Psychological assessments for conditions such as ADHD, PTSD, and learning disorders are FSA-eligible.
• Prescription medications for mental health: The medicines prescribed by a psychiatrist to treat mental health conditions such as antidepressants, anti-anxiety medications, and ADHD medications are eligible to be paid for with FSA dollars.
• Co-pays and deductibles: Mental health-related co-pays and deductibles are FSA-eligible, just like those for physical health care. You can use FSA dollars to pay for co-pays for therapy, psychiatry, or counseling sessions that meet requirements, coinsurance amounts, deductibles themselves, for inpatient or outpatient mental health treatments, and office visit fees for mental health care. They can also cover telehealth co-pays for virtual therapy or psychiatric consultations.
• Acupuncture (possibly): Acupuncture can sometimes be covered by FSA, as long as it was prescribed by a mental health professional.

But there are some things to consider that aren’t covered, such as:

• Wellness apps: Most general-purpose wellness apps are not FSA-eligible if they’re used for general relaxation, stress, relief, or mindfulness.
• Non-licensed therapists or counselors: If a provider doesn’t hold a state-recognized license, the IRS doesn’t consider their services to be medical care.
• Meditation apps: Meditation apps are usually not FSA-eligible. The IRS classifies them as “general health and wellness” tools, not medical treatments.

How to pay for therapy with your FSA

There are several ways to pay for therapy using your FSA dollars.

The simplest is to use your FSA debit card directly. Most FSA plans issue a card linked to your account balance, which you can use when paying your therapist just like a regular debit card. Some smaller practices, however, may not accept FSA cards.

If your provider doesn’t accept FSA cards, you can pay out-of-pocket and request reimbursement. You will need an itemized receipt showing the provider’s name, date of service, and session type. If you’re paying for treatment using insurance, you will also need an Explanation of Benefits (EOB), showing how much you are responsible for after insurance, in order to be reimbursed.

Working with your therapist’s billing department can make using your FSA much easier. Before your first session, clarify whether they accept FSA cards directly. Check if they bill insurance, or are out-of-network or require private pay. Finally, make sure they can provide you with itemized receipts if you are going to be requesting reimbursement, as well as EOBs if they bill through insurance.

The reimbursement process typically takes a few weeks. Within a few days of your session, request an itemized receipt from your therapist’s billing department, as well as an EOB if it’s being billed through insurance. Within 1-2 weeks of your session, log into your FSA administrator’s portal (e.g. PayFlex, HealthEquity, WEX, or WageWorks), and upload your documentation and a completed reimbursement form if required. Within 3-10 business days, an FSA administrator will review your claim. Once approved, the funds will be direct-deposited into your linked bank account within 1-2 business days, or sent via check.

It can be helpful to create a folder, either digital or physical, to keep track of records and expenses. Include all itemized receipts, EOBs if applicable, and notes on dates and payment confirmations.

Do you need a prescription or Letter of Medical Necessity?

Generally, you will not need a prescription or Letter of Medical Necessity (LMN).

If the expense is clearly medically necessary, such as seeing a licensed therapist for depression, you don’t need an LMN. In certain cases, however, if the treatment isn’t automatically FSA-eligible, you may need to obtain an LMN. This could be for things such as couples/marriage or general counseling. You would also need an LMN for non-traditional treatments, such as acupuncture or massage therapy.

A prescription may be required if your provider is prescribing you over-the-counter medications, which aren’t automatically FSA-eligible. This could be for medications such as prenatal vitamins, allergy medications, or pain relievers.

If you need to submit an LMN, you can request one directly from your provider. It must include your diagnosis, the recommended treatment, the duration or frequency of the treatment, and the provider credentials and signature.

Making the most of your FSA for mental health

To make the most of your FSA for mental health care, it’s a good idea to sit down at the beginning of your plan year, and make a plan for how you are going to spend your FSA dollars.

Estimate annual therapy costs, depending on how frequently you are going to be seeing a therapist, and how much they charge.

You can front-load appointment payments before the year end, as long as these appointments will be occurring during your plan year.

Use expiring funds strategically — some FSAs offer a grace period of 2-3 months after the plan year ends to spend remaining FSA dollars. Check whether your plan offers this and confirm exact deadlines.

You can combine FSA dollars with insurance to pay for therapy appointments. Make sure that you receive an itemized receipt and EOB from your therapist’s billing office if you can’t pay with your FSA card directly. Submit this documentation on your FSA portal for reimbursement.

Plan for next year’s contribution based on how much you spent this year. If you think you want to start regular therapy, consider setting aside more into your FSA next year. If you had a lot of expiring dollars this year, maybe set aside a little less next year.

Thanks to parity legislation which requires insurance to treat mental and physical conditions and treatments equally, you can use your FSA dollars to pay for therapy and mental health services.

Don’t let your funds expire when mental health care is available! Your mental health is worth caring for, and FSA funds can help you to do it. Check your balance to see if using FSA dollars for therapy is an option for you, and contact your FSA administrator if you have any questions.

FSAs can be more than just a tax benefit, they can be a tool that removes barriers to mental health care. By allowing you to set aside pre-tax dollars for medical expenses, FSAs make it easier to access the mental health care you need.

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Nora Rosenfeld is an editorial intern at Rescripted, studying Journalism and Global Health at Northwestern University. She is passionate about women’s and mental health and plans to pursue health and science writing.