What are the types of expenses that are FSA, HSA, and HRA eligible?

You or your employees are eligible to use FSA, HSA, and HRA funds to cover certain medical, dental, and dependent care expenses depending on the account type. First, let’s define what the government calls medical expenses. Definition of Medical Expenses Medical expenses are your out-of-pocket costs for diagnosis, cure, treatment, or prevention of a disease […]

2018 HSA contribution limit

You or your employees are eligible to use FSA, HSA, and HRA funds to cover certain medical, dental, and dependent care expenses depending on the account type.

First, let’s define what the government calls medical expenses.

Definition of Medical Expenses

Medical expenses are your out-of-pocket costs for diagnosis, cure, treatment, or prevention of a disease affecting any part of your body. This includes payments made to your physician, surgeon, dentist, and other medical practitioners, like your allergist or kidney specialist. It also includes the costs of any equipment you may need to buy such as crutches, medical supplies, and diagnostic devices needed, like a blood pressure monitor.

Medical expenses must be used primarily to treat or prevent a physical or mental problem or illness. For example, you can’t use your FSA, HSA, or HRA funds to cover expenses that make you generally healthy, like vitamins or a vacation.

FSA, HSA, and HRA Expenses Covered

The federal government lists qualified medical expenses that can be covered by these savings and reimbursement accounts in its Publication 502. For the most part, you can use your FSA, HSA, or HRA to cover copayments, deductibles, certain drugs, and some other health care costs up to a total of $2,550 per year.

For example:

  • If you have a deductible that you must reach before your health insurance starts to kick in, you can use your FSA, HSA, or HRA to cover those costs.
  • You can use these accounts to cover copayments for regular or emergency doctor or dentist visits.
  • If you owe for treatments or diagnostic services including medical or dental exams, X-rays, lab work required, and teeth cleanings, use your medical accounts to cover it.
  • You can use your savings or reimbursement accounts to cover prescriptions and some over the counter medications that are being prescribed or required by your physician. You can even cover the costs of medical equipment like crutches, bandages, and blood sugar test kits.

Non-Medical Expenses Covered by FSAs

A Dependent Care FSA lets you cover the costs of a babysitter or daycare provider who takes care of your children so that you can work. This includes the cost of after-school care, Pre-K programs, and day camps. They even cover the costs of caring for an adult dependent in case you have an incapacitated parent or grandparent living with you.

Non-Medical Expenses Covered by HSAs

An HSA functions similar to an IRA once you reach age 65 or later. You can withdraw funds for non-medical uses, but keep in mind that the funds will be subject to income taxes if not used to cover medical expenses.

Conclusion

The FSA, HSA, and HRA were created to provide you and your employees with tax-free options for managing the cost of healthcare. Your employees can save money by using them. Reach out to your health insurance broker, such as Zenefits, for more information.

Helpful Link:

The IRS’s Overview of FSAs, HSAs, and HRAs

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