Common Reasons for HSA/FSA Claim Denials- and How Truemed Helps

Even when using your HSA or FSA for qualified purchases, claims can be denied due to administrator interpretations, documentation gaps, or timing issues. Below are the most common denial reasons and how Truemed works to prevent them.

Claims are denied when a product or service is not clearly considered a qualified medical expense. This commonly applies to items deemed “dual-purpose,” such as fitness gear, supplements, or general wellness products.

Importantly, IRS Publication 502 is often cited as the standard for eligibility, but it is not a comprehensive list of what qualifies. Publication 502 outlines medical and dental expenses that are deductible on your tax return, and while most of these are also HSA/FSA-eligible, it does not cover every scenario where a health-related purchase could qualify.

To be considered a qualified medical expense when not listed in Publication 502, the purchase must meet the following requirements:

• A Letter of Medical Necessity from a licensed healthcare provider must confirm the expense is required for a treatment or prevention plan.

• The product or service must be primarily for the treatment or prevention of a diagnosed medical condition. If used for prevention, the letter must explain how the product directly prevents the condition in a medically meaningful way.

• The condition itself must be diagnosed by a qualified healthcare provider.

How Truemed Helps:
Truemed works only with products that can be medically justified as treating or preventing a health condition. Our eligibility process includes a medical intake survey that generates a compliant Letter of Medical Necessity when needed. This ensures that purchases meet both the letter and the spirit of IRS rules, even for non-obvious medical products.

Claims can be denied if documentation is missing or lacks the detail required to justify the expense. This includes vague receipts, missing provider information, or an LMN that lacks clinical rationale.

How Truemed Helps:
We walk customers through a structured intake process that collects all necessary information up front. We also provide itemized receipts and generate a compliant LMN for eligible customers, reducing the chances of denial due to paperwork.

Expenses are often denied if the purchase falls outside the plan year, grace period, or if the LMN is dated after the purchase. Some administrators strictly enforce these cutoffs.

How Truemed Helps:
We ensure that the LMN is issued either on or before the purchase date. Our system guides users to complete the medical intake in real time to keep documentation aligned with purchase timing.

Some administrators decline claims if the merchant does not fall into a recognized medical category, even if the product itself is eligible.

How Truemed Helps:
We partner directly with merchants and use payment infrastructure that routes transactions through a healthcare-compliant pathway. This minimizes the chance that a purchase is denied based on the merchant type.

If a cart includes both eligible and ineligible products, and split payment is not supported, the transaction may be denied entirely.

How Truemed Helps:
Truemed identifies item-level eligibility and enables split payment at checkout with supported merchants. Customers can apply their HSA/FSA funds to eligible items and pay for the rest with a personal card.

Administrators may reject a claim if it was already submitted, reimbursed, or charged using the HSA/FSA card. Attempting both card payment and reimbursement for the same expense will trigger a denial.

How Truemed Helps:
We provide clear receipts and transaction records to help users avoid accidental duplicate submissions. If a customer needs to request a refund or resubmit, we offer guidance on how to do so without triggering errors.