Friday, March 24, 2023

Are Treatments for Therapy, Nutritional Counseling, and Supplements HSA/HRA/FSA Friendly?

FSAs (Flexible Spending Accounts), HSAs (Health Savings Accounts), and HRAs (Health Reimbursement Arrangements) are all types of tax-advantaged accounts that can be used to pay for qualified medical expenses.

Physical therapy, nutritional supplements, and gym memberships may be eligible expenses that can, in rare cases, be reimbursed using these accounts, but there are some specific rules and limitations about which, you must be cognizant. 

For FSAs, eligible expenses are determined by your employer's plan and may vary. You can usually use FSA funds to pay for physical therapy with a prescription from a healthcare provider. Nutritional supplements and gym memberships are likely not eligible expenses, unless they are prescribed by a healthcare provider for a specific medical condition.

For HSAs, physical therapy, nutritional supplements, and gym memberships may be eligible expenses, again, if they are deemed medically necessary by a healthcare provider.  In that case, you can use HSA funds to pay for these expenses as long as they are not considered cosmetic or meant for general health and wellness purposes.

For HRAs, the rules and eligibility requirements will vary depending on your employer's plan. It's important to check with your employer or plan administrator to see if physical therapy, nutritional supplements, or gym memberships are eligible expenses.  In most cases, these procedures will only be covered if they are deemed necessary by a healthcare provider. 

In general, it's important to keep receipts and documentation of your expenses, and to check with your plan administrator to make sure that the expenses you are considering are eligible before using your FSA, HSA, or HRA funds to pay for them.

The IRS recently issued new guidance on this topic. There was nothing earth-shatteringly new in their statement, but more clarity has been provided.  Here is a summary of the IRS's pronouncement by Thompson Reuters

For the cost of therapy to be a medical expense, the therapy must treat a disease—thus, amounts paid for therapy to treat a diagnosed mental illness are medical expenses, while amounts paid for marital counseling are not. Likewise, the costs of nutritional counseling and weight-loss programs are medical expenses only if the counseling or program treats a specific disease diagnosed by a physician (e.g., obesity or diabetes); otherwise, these costs are not medical expenses. The cost of a gym membership is a medical expense only if the membership was purchased for the sole purpose of affecting a structure or function of the body (e.g., a prescribed plan for physical therapy to treat an injury) or treating a specific disease diagnosed by a physician (e.g., obesity or heart disease). However, the cost of exercise for the improvement of general health is not a medical expense, even if recommended by a doctor.