UMVA has learned that a popular new wearable device has been deemed eligible for pre-tax health savings, opening up new possibilities for consumers looking to utilize their HSA or FSA funds.
The device in question, a sleek and feature-rich wearable, has been certified as eligible for qualifying customers, allowing them to use their pre-tax dollars to purchase the device. However, understanding the intricacies of HSA and FSA eligibility is crucial, as it's not a straightforward process.
Health Savings Accounts and Flexible Spending Accounts enable individuals to set aside pre-tax dollars for qualified medical expenses. The IRS dictates what constitutes a legitimate medical expense, and historically, fitness trackers and smartwatches have not met the criteria on their own.
The IRS has ruled that devices of this type are generally used to promote "general health," rather than treat or monitor a specific medical condition, which means they typically don't qualify as medical expenses. However, a wearable device can become eligible when it's necessary for treating or monitoring a specific medical condition.
This is where a "Letter of Medical Necessity" comes into play. A Letter of Medical Necessity, essentially a doctor's note, classifies a specific purchase as a qualified medical expense under IRS guidelines. To obtain one, a physician must certify that the device will be used to treat or monitor a legitimate medical condition.
Sources have confirmed to UMVA that certain third-party players are making it easier to secure a Letter of Medical Necessity, partnering with health tech companies to streamline the process. This development has made it more convenient for individuals to use their HSA or FSA funds to purchase wearable devices.
There are two primary ways to use pre-tax health dollars to purchase a wearable: paying directly with an FSA or HSA card at a qualifying retailer or paying out of pocket and submitting for reimbursement. Major retailers accept FSA/HSA cards for eligible items, and having a Letter of Medical Necessity ready is essential.
If a wearable isn't on a pre-approved eligibility list, an FSA card may be declined at the register, even with a valid Letter of Medical Necessity. In this case, paying out of pocket and submitting for reimbursement is an alternative option.
When submitting for reimbursement, individuals typically need to provide an itemized receipt and a Letter of Medical Necessity. The reimbursement process varies by administrator, but most claims are reviewed within a few business days to a few weeks.
The bottom line is that even if a device is marketed as health-focused, it doesn't automatically make it FSA or HSA eligible. Eligibility hinges on documentation, not just device features. If a qualifying medical condition and a physician willing to support the case with a Letter of Medical Necessity are present, it may be possible to use pre-tax dollars to purchase a wearable.
FSA funds are use-it-or-lose-it on an annual basis, so timing is crucial. In contrast, HSA funds roll over indefinitely, making it less urgent but still essential to keep meticulous records.
