What Health Coaches Need to Know About FSAs and HSAs

For many health coaches who decide to start their own coaching practice, the business learning curve can feel daunting, at least at first.

While managing money, taxes, and business logistics might not be why you became a coach, understanding certain financial tools can make a real difference—for both you and your clients.

One type of tool that often sparks confusion is pre-tax savings accounts: FSAs and HSAs. How do they impact your clients’ ability to pay for health-related services, including coaching? What do health coaches need to know about these types of accounts?

Today, we’re breaking down FSAs and HSAs. We’ll clarify your responsibilities as a coach and business owner so that you can guide your clients to make informed financial decisions about their health.

FSA vs. HSA: What’s the difference?

For people in the US, Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) are two key tools for managing healthcare costs. These pre-tax savings accounts can help cover medical expenses, but they work in very different ways.

Most people don’t open these accounts on their own. Instead, they access them through an employer-sponsored health insurance plan, a spouse’s health benefits plan, or, in the case of HSAs, by enrolling in a high-deductible health plan through an employer or the healthcare marketplace.

Here’s what FSAs and HSAs have in common:

They allow you to set aside money before you pay taxes on it, reducing your taxable income and saving you money.
You can withdraw your funds tax-free to pay for qualified medical expenses, including many medications, surgical procedures, dental care, medical devices, and even some over-the-counter items like sunscreen.

But that’s where the similarities end. HSAs and FSAs work differently, offer different benefits, and have very different timelines.

How FSAs and HSAs differ:

FSA:

Lower annual contribution limits, as determined by the IRS
Works like a checking account—funds are available to spend like cash, but they don’t earn interest or grow over time
Funds must be used within the calendar year, or else they expire and the account resets to zero (“use it or lose it”). Some employers offer a brief grace period or roll over a portion of the funds for a short time, but not both
Available only through an employer; individuals cannot open their own

HSAs

Higher annual contribution limits
Works like an investment or retirement savings account. You can invest your contributions, keep them as cash, or a mix of both.
Funds roll over indefinitely—no expiration
Available only to those enrolled in a high-deductible insurance plan ($1650+ deductible for individuals, or $1330+ for families)

Both FSAs and HSAs allow tax-free contributions and withdrawals, but HSAs offer an additional advantage: tax-free growth. When used strategically, HSAs can be a long-term investment and even a tax-free income stream in retirement.

The key takeaway: Look to the second word in their names for the easiest way to remember the difference. A Flexible Spending Account is meant to be spent each year. A Health Savings Account is designed for both immediate spending and long-term saving and growth.

Can Clients Use FSAs and HSAs To Pay for Coaching?

For many years, the answer was a simple no. But as of 2024, that’s changing.

With the growing recognition of health coaching as an effective tool for disease prevention and management, the IRS has reevaluated its stance and issued new guidance.

Under the updated guidance, coaching services may qualify as a medical expense if a licensed healthcare provider deems coaching medically necessary for treating or preventing a specific condition. This means clients can use their FSA or HSA funds to pay for coaching, as long as they obtain a Letter of Medical Necessity (LMN) from their doctor and receive approval from their insurance plan administrator.

While this change creates new opportunities for clients to access coaching, the process isn’t automatic. The burden of securing FSA or HSA approval falls primarily on the client, who works with their doctor to obtain the proper documentation and then submits their expenses for reimbursement. Health coaches who understand the basics can help guide the conversation and provide support for clients navigating the process for the first time.

How Health Coaches Can Guide Clients

Many people don’t fully understand FSAs and HSAs, or know that they can use them to pay for coaching. As a coach, you have an opportunity to offer clarity and support—and you don’t need to be a financial expert to do so.

Your role in these conversations can be as simple or as involved as you feel comfortable with. Some coaches may choose to provide hands-on assistance, while others prefer to share resources and let clients navigate the process independently. Either approach is valid. The key is to be clear about your boundaries and communicate them effectively.

Here’s what you can do to support clients who want to explore payment with an FSA or HSA:

Educate clients about FSAs and HSAs.
- Ask if they have one of these accounts, and if so, whether they understand how it works. Many people don’t realize they have access to pre-tax healthcare funds or that health coaching can qualify as a reimbursable expense.
Encourage them to check with their insurance plan administrator.
- If your client is interested in using FSA or HSA funds to pay for coaching, their first step is to confirm that their insurance plan administrator considers medically-necessary health coaching as a reimbursable expense.
Explain the Letter of Medical Necessity (LMN).
- After confirming with their insurance plan administrator, the client will need to ask their doctor for a document called a LMN stating that coaching is medically necessary for treating or preventing a condition. The client will then submit the completed LMN to their insurance provider.
Provide a receipt for coaching services.
- Clients typically pay out of pocket for approved coaching services and then submit their receipts for reimbursement. Providing them with detailed receipts, including sessions dates, fees, and identifying they service the received as health coaching, can make the process smoother for them.
Be prepared to accept direct card payment.
- Some FSAs and HSAs allow clients to pay providers directly with a payment card, so make sure your payment collection method supports credit/debit cards. If your client is interested in paying with card, they should confirm direct payment eligibility with their plan administrator.
Keep clear records of services provided.
- While health coaches don’t need special certifications to accept FSA or HSA payments from clients, maintaining organized records of the services you provide is a good practice.

Although the process of using FSA and HSA funds for coaching falls primarily on the client, your knowledge and guidance can make it easier for them to navigate. Whether you take a hands-on approach or simply provide helpful resources, being informed about the basics allows you to support your clients while keeping your focus on their health and well-being.

Is Health Coaching Covered by Health Insurance?

For the moment, the short answer is “not really,” but there’s more to the story. Health coaching’s relationship with insurance, billing, and reimbursement is actively evolving. To learn more about how health coaches can navigate this changing landscape, check out the webinar below.

Webinar: Health Coaching and Health Insurance Coverage

The ability to use FSA and HSA funds for health coaching is yet another step toward greater recognition of its role in healthcare. While the pre-tax payment process still requires a few extra steps, it opens new doors for clients looking to access coaching in an affordable, financially savvy way. As health coaching gains traction in mainstream healthcare, these small policy shifts lay the groundwork for even greater accessibility in the future.