Compliance News | April 22, 2024

Health Accounts Can't Be Used for General Health Expenses

The IRS has issued an alert reminding consumers and health plan sponsors that expenses that are merely beneficial to general health, including for nutrition and wellness, are not medical expenses.

Consequently, Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs) and health Flexible Spending Arrangements (FSAs) cannot be used to pay for those expenses or to reimburse individuals for them.

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The impetus

The IRS acted in response to recent misleading marketing suggesting health accounts can be used for certain food and wellness expenses, such as food for weight loss or home-delivery meal services.

The IRS alert notes:

Some companies mistakenly claim that notes from doctors based merely on self-reported health information can convert non-medical food, wellness and exercise expenses into medical expenses… Such a note would not establish that an otherwise personal expense satisfies the requirement that it be related to a targeted diagnosis-specific activity or treatment.

Expenses that are reimbursable from health accounts

Medical expenses reimbursable from health accounts include:

  • Payments for services delivered by providers to prevent, diagnose, treat, mitigate or cure disease or improve a bodily function
  • The costs of equipment, supplies and diagnostic devices related to those services
  • The costs of drugs prescribed by a physician

Nutritional counseling is a medical expense if it treats a specific disease diagnosed by a physician (e.g., diabetes, obesity or an eating disorder).

A weight-loss program is a medical expense if it treats a specific disease diagnosed by a physician (e.g., diabetes, heart disease, hypertension or obesity).

The cost of a gym membership is a medical expense if it was purchased explicitly to improve a structure or function of the body (e.g., prescribed plan for physical therapy to treat an injury) or the sole purpose of treating a specific disease diagnosed by a physician.

For additional information, refer to the IRS’s FAQs.

Possible action item

Sponsors of health plans with health accounts may wish to remind participants about the types of health expenses that are reimbursable and which ones are not.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.