HSA & FSA Processing

Overview

NMI supports Health Savings Account (HSA) and Flexible Spending Account (FSA) card processing through the NMI gateway on TSYS. This feature helps partners reduce unnecessary declines for merchants serving healthcare consumers and expand acceptance into healthcare verticals. Partners should reference this article when onboarding merchants who accept HSA/FSA cards or when troubleshooting HSA/FSA transaction issues.

What Are HSA and FSA Cards?

HSA and FSA accounts are tax-advantaged benefits that let consumers set aside pre-tax money for eligible healthcare expenses, including doctor visits, prescriptions, dental care, and vision.

• HSA (Health Savings Account) — Tied to a high-deductible health plan (HDHP). Funds roll over year to year and are owned by the cardholder.
• FSA (Flexible Spending Account) — Employer-sponsored and typically use-it-or-lose-it within a plan year.

From a payments perspective, HSA and FSA cards function like standard Visa or Mastercard debit cards. However, they require additional eligibility data to be included in the transaction to be approved. Missing that data is one of the most common reasons HSA/FSA cards are declined at the point of sale.

Why It Matters for Partners

Partners supporting merchants in healthcare-adjacent verticals need to understand how HSA/FSA processing works to:

• Reduce declines — Most HSA/FSA declines are caused by missing eligibility fields, not insufficient funds. Partners can address this directly through proper configuration.
• Expand merchant acceptance — Non-healthcare merchants can qualify to accept HSA/FSA cards through IIAS integration or the 90% Rule (see below).
• Configure merchant accounts correctly — The HSA/FSA substantiation indicator must be set in the merchant's TSYS processor settings by the partner. This is a one-time setup step that affects every transaction.

Prerequisites and Access Requirements

The following conditions must be met before a merchant can process HSA/FSA transactions through NMI:

Note: The Virtual Terminal does not support the additional data fields required for HSA/FSA transactions. All HSA/FSA processing must be done via API or Cloud.

How It Works

Merchant Configuration Types

NMI passes the required eligibility data to TSYS so that HSA/FSA transactions are approved correctly. Three merchant configurations are supported:

1. Healthcare MCCs — Traditional medical merchant categories (clinics, pharmacies, etc.) that are automatically eligible for HSA/FSA acceptance. No IIAS is required.
2. Non-Healthcare MCCs with IIAS — Merchants outside of healthcare categories who use an Inventory Information Approval System (IIAS) to identify HSA/FSA-eligible items at checkout. If a merchant already has an IIAS, NMI can pass that eligibility data directly to TSYS for compliant approvals.
3. 90% Rule — Merchants where at least 90% of total sales are healthcare-eligible qualify for an IRS exemption and do not need a full IIAS to accept HSA/FSA cards.

What is an IIAS? An Inventory Information Approval System (IIAS) is a point-of-sale system that identifies which items in a transaction are HSA/FSA-eligible. It is required for merchants outside of healthcare MCCs who want to accept HSA/FSA cards. If your merchant already has an IIAS, NMI can pass that data to TSYS to enable compliant approvals.

Eligible Merchant Category Codes (MCCs)

The following MCCs are generally eligible for HSA/FSA processing without an IIAS:

Merchants outside these categories may still be eligible if they use an IIAS or qualify under the 90% Rule.

Setting Up a Merchant for HSA/FSA

1. Confirm the merchant is using TSYS as their processor.
2. Determine the merchant's configuration type (Healthcare MCC, IIAS, or 90% Rule).
3. In the Partner Portal, navigate to the merchant's TSYS processor settings.
4. Select the appropriate HSA/FSA substantiation indicator.
5. Confirm the merchant's integration method (API or Cloud) supports the required FSA amount fields.
6. Test the configuration with a transaction before going live.

Important: The HSA/FSA substantiation indicator is set at the merchant account level — it cannot be changed per transaction.

Availability and Getting Started

HSA/FSA processing is live and partners can enable it for merchants now through the standard TSYS processor configuration in the Partner Portal.

If you are interested in working with NMI as a BETA tester to validate your integration before going live, reach out to your Channel Account Manager (CAM). NMI is actively looking for partners to participate in structured testing to ensure the product performs as expected across real merchant environments.

For developer integration details, please see the HSA/FSA Developer Documentation.

Troubleshooting Guide

HSA/FSA Card Is Declining

Common Questions

What happens if FSA amount fields aren't included in the transaction? If a merchant is HSA/FSA-enabled but the FSA amount fields are omitted from the transaction request, the transaction will process as a standard card payment without HSA/FSA tagging. It won't be declined. It simply won't be recognized as an HSA/FSA transaction.

Do captures, voids, or reversals also need FSA/HSA fields? No. If a linked transaction (such as a capture, void, or reversal) is tied to an original HSA/FSA authorization, the gateway will automatically tag it as FSA-related. You do not need to re-send FSA amount fields on those follow-on transactions.

Can HSA/FSA cards be processed through the Virtual Terminal? No. The Virtual Terminal does not support the additional data fields required for HSA/FSA transactions. Processing must be done via API or Cloud.

Who configures the merchant's TSYS account for HSA/FSA? Partners set the IIAS substantiation indicator in the merchant's processor settings in the Partner Portal. This is a merchant-level configuration and cannot be changed per transaction.

Why would an HSA/FSA card decline? The most common causes are missing eligibility fields in the transaction request, an unsupported card brand, or the merchant's TSYS account not being configured correctly. Start troubleshooting by verifying the merchant's processor settings in the Partner Portal and confirming the required data fields are being submitted.

What MCCs qualify for HSA/FSA without an IIAS? Healthcare MCCs such as medical offices, pharmacies, dental, vision, and hearing aid providers are generally auto-eligible. See the MCC table in the "How It Works" section for the full list. Merchants outside those categories may still qualify via IIAS or the 90% Rule.

How can I participate in the BETA? HSA/FSA processing is live and available for all partners. However, we are running a BETA program and would love to have partners join us to help test the product in real merchant environments. If you are interested in participating, reach out to your CAM to get involved.

Key Definitions

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