The Internal Revenue Service (IRS) has issued FAQs that explain when health flexible spending arrangements (FSAs), health savings accounts (HSAs), Archer medical savings accounts (Archer MSAs), and health reimbursement arrangements (HRAs) can reimburse nutrition, wellness, and general health expenses. The FAQs define when these expenses qualify as medical expenses under § 213 of the Internal Revenue Code (IRC).
IRC § 213 defines medical expenses as “costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body.” These medical expenses include payment for legal medical services that physicians and other medical practitioners provide and medications that they prescribe. They also include expenses for equipment, supplies, and diagnostic devices needed for these purposes. Any allowable medical expenses must primarily alleviate or prevent a physical or mental disability or illness. Expenses for services or items beneficial to general health do not qualify as medical expenses under IRC § 213.
For example, the costs of dental, eye, and physical exams are reimbursable medical expenses under IRC § 213 because they diagnose whether a disease or illness is present. Expenses related to smoking cessation, drug-related substance use, and alcohol use disorders also are reimbursable because they treat disease. Therapy can be a medical expense under IRC § 213, but only to treat a disease, such as a diagnosed mental illness; for example, therapy for marital counseling would not be reimbursable.
Similarly, the costs of nutritional counseling, weight-loss programs, and gym membership are medical expenses within the meaning of IRC § 213 only if they are to treat a specific disease diagnosed by a physician or to affect a structure or function of the body. For instance, a gym membership to improve general health, even on a doctor’s recommendation, would not be a reimbursable medical expense under IRC § 213.
Nutritional supplements can be a medical expense under IRC § 213, but only if a medical practitioner has recommended them as a treatment for a specific medical condition diagnosed by a doctor. Likewise, food and beverages purchased for weight loss or other health reasons can be reimbursable medical expenses, but only if they meet all the following three conditions:
- The food or beverage does not satisfy normal nutritional needs;
- The food or beverage alleviates or treats an illness; and
- A physician substantiates the need for the food or beverage.
Additionally, the expense for these items is limited to the amount by which the items exceed the cost of a product that satisfies normal nutritional needs.
Finally, the FAQs clarify that IRC § 213 does not cover nonprescription or over-the-counter drugs except insulin. FSAs, HSAs, Archer MSAs, and HRAs cover nonprescription drugs, including insulin and menstrual care products.
These FAQs underscore the responsibility and importance of plan administrators in obtaining appropriate documentation of claims against FSAs, HSAs, Archer MSAs, and HRAs before reimbursing them. The fine distinctions between when an expense qualifies as a medical expense under IRC § 213 and when it does not illustrate the challenges of discerning the propriety of reimbursing some claims.