Qualifying as “Prevention” Under IRS Code 213(d)
Today, one of the biggest challenges FSA and HSA users face is determining what is eligible as medical care. It’s one of the central issues that requires reform to make these accounts more valuable for American families.
Internal Revenue Code (IRC) 213(d) currently defines qualified medical care as “amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body” Unfortunately, in order for medical products to qualify as prevention, the IRS has also suggested that there must be an imminent probability of contracting a disease or illness without the use of the product.
While FSAs and HSAs have been subject to numerous changes over the years through various rounds of regulatory guidance and legislative reform, the IRS definition that dictates what tax-free healthcare consumers can purchase has stayed the same for decades. As millions of American families turn to their workplace benefits to support their long-term health and overall wellness, they are surprised to find that while these funds are extremely helpful in the event of sickness or medical emergency, there are restrictions in helping them improve their overall state of health or in pursuing healthy activities that can help them avoid health issues in the future.
This narrow definition of prevention no longer matches the reality of the world we live in:
- Americans are active and engaged healthcare consumers. They want to take every step possible to manage their healthcare costs and know that a big part of managing those costs is maintaining their health to contribute to reducing the cost of care for everyone.
- Prevention is the key to driving down medical care use and it starts with some of the products not widely accepted as qualified medical care, including vitamins and supplements to promote and maintain overall good health, gym memberships and fitness equipment to promote healthy lifestyles and health maintenance, and more.
- We all want to help control the rising costs of medical care. Americans who want to take the proper steps to protect themselves during this crisis should not have the added cost and burden of going to a doctor for a letter of medical necessity for these important expenses. These items should always be FSA/HSA eligible.
We encourage the IRS to revisit IRC 213(d) and update the current parameters of “prevention” to help FSAs and HSAs do what they were designed to do: help consumers reduce the overall cost of their healthcare and save money on medical expenses.
By expanding the current pool of eligible expenses to encompass preventive health and wellness measures like vitamins and supplements, gym memberships, insect repellent and more, tax-free healthcare consumers can actively invest in their wellness to improve their long-term health outcomes. From reducing employee healthcare spending to the burden on the overall American healthcare system, expanding the IRS requirements for prevention is a logical step forward for the future of tax-free healthcare benefits.