While tax advantaged health accounts have many benefits, they can present challenges. One of the largest pain points for many users of these accounts is determining what the account can pay for. The items or services that can be purchased through the account are known as “eligible expenses” (sometimes called “qualified expenses”).
One would think that certain items would ALWAYS be considered eligible, such as a hospital bill. However, even that’s not always the case.
But why? It’s a hospital. The items or services purchased there are all related to medical purposes, so they should all be eligible. Right?
Not exactly! There are a couple of reasons that doesn’t entirely hold up:
Not all procedures completed at the hospital are eligible!
Surprised? We get it. It’s weird to think you can receive a service, item or product at the hospital that isn’t for medical purposes.
But, think about it this way: You can go to the hospital for a cosmetic surgery. Like getting an inconvenient mole removed. Depending on the circumstances, that may not count as an eligible medical expense. (Unless you have filled out the appropriate paperwork that verifies it is, in fact, a medical procedure).
But otherwise? That is primarily a cosmetic procedure, not a medical one.
So, you might be wondering:
What does count as an eligible medical expense?
We covered this our blog “Wait, what do you mean these aren’t eligible under my FSA?” In short, it comes down to two things:
- The treatment, item, procedure or service must be used to diagnose, cure, treat, mitigate and/or prevent a disease, injury or symptom of a disease.
- It’s primary purpose must be for #1 (this is known as the “but for” clause).
To clear up any confusion around the “but for” clause: If the primary purpose of the eligible item is something other than to diagnose, cure, treat, etc. then it probably won’t be considered eligible.
For example, dental floss. (Another concept borrowed from the “Wait, what do you mean…” blog that you should really read). While your dentist may tell you to use dental floss because it’ll help fight gingivitis, the primary purpose of dental floss is not to fight gingivitis. So it’s not a medical expense.
Now, let’s say you get a hospital bill and you pay for it with your card. Then, you get asked to provide “additional documentation.”
Let’s talk about that.
Just because you’re asked for more info doesn’t mean it’s not eligible
We learned that not all items or procedures you receive at the hospital are eligible. And, since not all services provided at/by a hospital are eligible, you might be asked to prove that the service you received was eligible.
When this happens, it is known as substantiation. (See more on what substantiation is in this blog).
Depending on the situation, you may very well be able to use your pre-tax account money to pay for the service you received. But, you may need to provide a little bit of documentation to do so. So, while it’s a bit of a pain, it’s worth it to go through the process of submitting that itemized receipt (or an Explanation of Benefits).
So, as a recap:
- Just because it happened at the hospital doesn’t mean it is eligible
- Just because you’re asked for additional documentation doesn’t mean it isn’t eligible
If you have any questions, check out our other blog posts or visit our FAQs section. If you don’t see the question you’re looking for, reach out to firstname.lastname@example.org