Healthcare and medical coverage are complex topics that have many facets to consider. One area that is often overlooked by individuals is the opportunity to save money through a financial account geared specifically for healthcare expenses.
Depending on the type of account established, you may be able to save money on supplements and medical items used to treat your specific health condition(s). If you opt for either a Flexible Spending Account (FSA) or Health Savings Account (HSA), you may be able to spend pre-tax income on certain medical expenses.
Understanding the basic differences between flexible spending and health savings accounts and being aware of the processes needed to utilize them effectively can help save you money on supplements and other medical products.
What’s the Difference?
For the most part, FSAs and HSAs provide similar benefits that can reduce medical expenses. However, there are some important differences that you should be aware of before opening an account or using the funds that you have already invested.
Flexible Spending Account
A Flexible Spending Account (FSA) is established by employers and allows employees to reserve pre-tax earnings to be spent on medical products and services. This includes co-pays, deductibles, over-the-counter products and more. Because the money held in an FSA is not taxed, employees using this system can save upwards of 40% off every dollar placed into the account providing they spend it on qualified health expenses.
Generally, all the money within a FSA must be spent within the plan year. In some cases, employers may allow employees two and a half months to use the excess money in their account before it is lost. Alternatively, employers may provide an option to roll over up to $500 from the previous year to be used in the following year. Employers must offer either one of these options but cannot provide both. At the end of the year, or the extended two and half month grace period, the money left in an FSA is lost. Therefore, it is important to budget contributions to this account carefully.
Health Savings Accounts
Health Savings Accounts (HSAs) also allow individuals to place pre-taxed income into holding to be spent on qualified medical expenses. In a similar fashion to FSAs, a Health Savings Account can reduce overall expenses for service charges like deductibles, copayments, coinsurance and others. Unlike flex spending accounts, the money held within an HSA remains from year to year and can even earn interest. Depending on the account, this method can even function as a supplement to a dedicated retirement plan. However, as with any financial decision it is important to consider all the options available.
HSAs are only available to those with a High Deductible Health Plan (HDHP). These are usually categorized as any plan with a deductible of at least $1,350 for individuals or $2,700 for families. Individuals may open their own account through a bank or financial institution. HSAs may also be provided by your employer.
There are multiple factors involved in whether or not a supplement is eligible for FSA or HSA reimbursement. Changes made through the Affordable Care Act of 2011 changed what is required when purchasing supplements or over-the-counter products with an FSA or HSA.
For both types of accounts, the patient must have a prescription for any over-the-counter items or products containing active medical ingredients to be reimbursed. This means that every-day and common use supplements cannot be written off or reimbursed. However, if your doctor has provided a Letter of Medical Necessity for a supplement to treat a specific condition you may be able to save big on supplement costs. You may be eligible for reimbursement if the supplements are a necessary for treating a condition.
Supplement Eligibility with an FSA or HSA
There are specific guidelines provided for what is considered an eligible supplement as opposed to a necessary part of one’s treatment. The law states that:
“You can’t include in medical expenses the cost of nutritional supplements, vitamins, herbal supplements, ‘natural medicines,’ etc. unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. Otherwise, these items are taken to maintain your ordinary good health and aren’t for medical care.”
Therefore, the supplements, vitamins and medical products that can be purchased using a medical account depends on the needs of the individual and the judgment of their physician. For example, those with a vitamin or mineral deficit contributing to a chronic illness may be prescribed a specific selection of nutrients to resolve the issue. In this case, they could use funds from their FSA or HSA as long as the doctor provides a Letter of Medical Necessity.
Vitamins can be difficult to categorize because they are often used for general maintenance but can be a necessary part of treatment for certain conditions. For example, daily multivitamins are not eligible under FSA or HSA. However, there are some vitamins that are eligible as long as they are accompanied by proper documentation from a doctor. One example of this is prenatal vitamins. Because these vitamins help prevent birth defects and promote healthy development of the child they will generally be covered by an FSA even though they are technically a supplement.
There are many products that are automatically covered by a medical account. A full list of FSA and HSA eligible medical items can be found at FSA Store and HSA Store respectively. Keep in mind that if the supplement or product you are using to treat your condition is not on either list it may still be eligible. Simply consult your physician and see if they can provide a Letter of Medical Necessity for your supplement treatment.
Stay Informed to Save on Supplements
If there is any question regarding a specific vitamin or supplement and its eligibility for FSA or HSA reimbursement speak with your physician or medical benefits administrator. For supplements it is likely that your doctor will need to provide additional documentation in the form of a Letter of Medical Necessity. As long as the product is part of the doctor’s prescribed medical treatment plan there should not be any issues.
Being familiar with the many different products covered through a medical account can save you money on healthcare products and even help pay for supplements that you have been prescribed to treat an existing condition. Talk to your doctor about supplement eligibility through your medical account.