How FSAs/HSAs can Change with the Times

 

The definition of medical “prevention”

Today, one of the biggest challenges facing long-term FSA and HSA reform is the IRS’s definition of qualified medical care. It’s this central issue that hangs over future efforts for reform to make these accounts more valuable for American families. 

IRS 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 indicated that there must be an imminent probability of contracting a disease or illness without the use of the product.

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 personal protective equipment (PPE) to protect people during public health crises, 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 to a get a letter of medical necessity for these important protective items. These items should always be FSA/HSA eligible.

The issue with the narrow definition of prevention translates to so many categories which would help with the health and well-being of so many:

Personal Protective Equipment (PPE): After months of enduring the 2020 COVID-19 pandemic, it is not currently clear if PPE would qualify as eligible medical care with an FSA/HSA. Over 70 millions Americans rely on these funds to cover their out of pocket medical expenses, and they need this flexibility now more than ever with budgets strained by job turnover and new medical needs. 

We welcome the IRS to issue guidance on this very important category and hope that they will allow these types of items for purchase with an FSA and HSA in response to recent CDC guidance suggesting every American should wear face masks, use hand sanitizer and practice other personal safety measures to help prevent the spread of disease. 

Vitamins and Supplements: Currently, there are only two types of vitamins which will be approved for use with an FSA/HSA without documentation from a doctor: prenatal vitamins and glucosamine. 76% of Americans use vitamins, and there have been several rounds of legislation and appeals from Congress urging the IRS to expand use of FSAs and HSAs to include vitamins as qualified expenses. According to The Dietary Supplement Health and Education Act of 1994, a statement for a dietary supplement may be made if the statement “describes the role of a nutrient or dietary ingredient intended to affect the structure of function in humans”, very closely matching the IRS’ current definition of qualified medical care, stating that medical care includes “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”. 

There is certainly precedent to expand this category and Health-E Commerce would support these legislative efforts as well as encourage the IRS to issue favorable guidance under the current regulations. 

Fitness Equipment: According to the CDC, “Heart disease and stroke are two of the leading causes of death in the United States. Following the recommendations and getting at least 150 minutes a week of moderate-intensity aerobic activity can put you at a lower risk for these three diseases. And these are only a few of the benefits to your health with regular and routine exercise. 

H.R. 5138, the Bipartisan HSA Improvement Act, would expand the definition of qualified medical care to include certain amounts paid for “physical activity, fitness and exercise” and is only one of several bills which have been introduced with the same common goal. 

Insect Repellent: It’s not currently clear whether or not insect repellent will qualify as eligible under an FSA/HSA. But this is an immediate problem for Americans – Between 2004 and 2016, the number of reported cases of tick-borne disease doubled and has increased into 2020 (CDC). Against this backdrop, we do not have clear guidance as to whether or not insect repellent will meet the requirements for it to constitute prevention under medical care. This again highlights the need for a new definition of prevention under Internal Revenue Code 213(d), in favor of these types of preventive items people need to prevent disease and maintain their good health.