HSA Eligible Expenses

HSA (health savings account) eligible expenses are those medical expenses covered by HSA funds. Types of expenses which may be included are:

  • Copays
  • Dental expenses
  • Vision expenses
  • Deductibles
  • Prescription medications
  • Some over-the-counter health-care products
  • Health care services

Over-the-counter, non-prescription medications are generally not included as qualified medical expenses. However, insulin is an exception.

Guidelines for spouses and dependents of enrollees are the same as for the employee, as long as the enrollee was married to the spouse during the time the spouse received the medical services or when payment was made for medical expenses. Dependents are eligible as long as they were claimed on an employee's taxes during the time when they received medical services or when expenses were paid.

Expenses are only considered eligible if they are incurred after the HSA effective date. Any expenses incurred before your effective date will not be covered or reimbursed.

HSA Eligibility

Before you can be eligible for an HSA, you must first be enrolled in what's known as a High-Deductible Health Plan, also known as an HDHP. This is a special health insurance plan. An HDHP has high deductibles, which is one of its disadvantages. However, your monthly premiums are typically much lower than those plans with lower deductibles. This makes HDHPs attractive for anyone who wishes to minimize upfront costs that often accompany quality health care.

What Counts as Qualified Medical Expenses?

The IRS determines which expenses are eligible for reimbursement and which are not eligible because health accounts are created by the tax code.

Just a few examples of what qualified expenses include:

  • Doctor's visits
  • Breast reconstruction surgery
  • Prescriptions
  • Eyeglasses and contact lenses
  • Acupuncture
  • Drug and alcohol addiction treatment
  • Dental treatment
  • Eye exams
  • Hearing aids
  • Hearing aid batteries
  • Fertility enhancements
  • Operations and non-cosmetic surgeries
  • Nursing services
  • Smoking cessation
  • Physical therapy
  • Psychiatric care

If you use an HSA to pay for expenses that are not qualified, you must pay income tax on those funds. A 20% penalty is assessed for non-qualified expenses.

Types of expenses that fall into the non-qualified category include:

  • Diaper service
  • Cosmetic surgery
  • Hair removal
  • Funeral expenses
  • Illegal treatments and operations
  • Health club fees
  • Maternity clothing
  • Over-the-counter medication with no prescription
  • Nutritional supplements
  • Toiletries such as toothpaste and toothbrushes
  • Teeth whitening products and procedures
  • Weight loss programs, unless prescribed by a doctor to treat a disease

For all health accounts, while qualified expenses are similar, expect some differences between health savings accounts and flexible spending accounts.

Eligible expenses are those that seek to alleviate or prevent certain illnesses, physical, or mental defects; this includes illnesses and issues related to dental and vision care. Other types of medical expenses that may be eligible include services and procedures pertaining to:

  • Ambulance rides
  • Yearly physical exams
  • Artificial teeth or limbs
  • Bandages
  • Body scans
  • Birth control pills
  • Braille literature
  • Breast pumps
  • Chiropractor visits
  • Crutches
  • Eye surgery
  • Guide dog services
  • HMO
  • Home care
  • Diagnostic devices
  • Learning disability services
  • Oxygen
  • Organ donation
  • Optometrist
  • Nursing home
  • Special education
  • Prosthesis
  • Sterilization
  • Equipment to assist the hearing- or vision-impaired
  • Wheelchairs
  • Wigs
  • X-rays

Types of expenses that are generally ineligible include:

  • Controlled substances
  • Childcare
  • FSA
  • Future medical care
  • Personal use items
  • Swimming lessons
  • Veterinary fees
  • Hair transplant

IRS-qualified medical expenses often include:

  • Dermatologist fees
  • Gynecological visits
  • Obstetrician visits
  • Hospital bills
  • Podiatrist visits
  • Prenatal care
  • Postnatal treatment
  • Vaccines

These are not meant to be exhaustive lists, and you should consult with your particular HSA plan to be clear about eligible vs. non-eligible expenses.  

Products and Services: Eligible vs. Non-Eligible

You do not generally need a prescription for products that don't contain active medical ingredients. Such non-prescription items that are generally HSA-eligible include:

  • Athletic braces
  • Athletic supports
  • Baby thermometers
  • Blood glucose monitors
  • Blood test strips
  • Blood pressure monitors
  • Condoms
  • Children's first aid
  • Eye glass and contact lens accessories
  • First aid kits
  • Diabetes care items
  • Glucose tablets
  • Home medical equipment
  • Motion sickness aids
  • Nasal spray
  • Heating pads and wraps
  • Sunscreen
  • Denture cream
  • Denture cleansers
  • Shoe insoles and inserts
  • Pregnancy and fertility tests
  • Prenatal vitamins
  • Walking aids
  • Vaporizers
  • Inhalers

In general, you'll need a prescription for HSA-eligible medical items such as:

  • Anti-fungal treatments
  • Lice treatment
  • Anti-itch treatments
  • Acne treatment
  • Allergy medication
  • Cough, cold, and flu medication
  • Children's fever medication
  • Children's pain relievers
  • Baby aspirin
  • Aspirin
  • Chest rubs
  • Ear drops
  • Ear wax removers
  • Cough drops
  • Nicotine gum
  • Oral pain medications
  • Pain relieving creams
  • Wart removers
  • Skin treatments
  • Stomach aids

If you have specific questions or concerns relating to a procedure, it's best to consult with your plan or plan provider. This way, you won't have to pay out-of-pocket for a service you mistakenly believed to be eligible for coverage. Because there are differences between HSAs, FSAs, LCFSAs (limited care flexible spending accounts), and DCFSAs (dependent care flexible spending accounts), some medical issues that are eligible under one plan are not eligible under others. In addition, some treatments are only covered if they're deemed medically necessary. These expenses can range from AA meetings, acupressure, and adult day care to defibrillators and disposable underwear.

HSA Funds and Their Relation to Insurance Premiums

In general, you can't use HSA funds to pay for your health insurance premiums. There are, however, some exceptions.

For employees who elect for COBRA coverage, they may pay for COBRA premiums with their HSA funds. In addition, employees who are enrolled in health insurance (not COBRA) and who also receive unemployment compensation are allowed to pay for their insurance premiums with their HSA funds.

Employees who are 65 years of age or older may pay their premium portion of a health insurance plan provided by an employer with their HSA funds. They may also use their HSA funds to cover Medicare premiums. HSA owners are allowed to use HSA funds to pay for insurance premiums covering long-term care.

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