The funds in your HSA will be available to help you pay your or your eligible dependents' out-of-pocket costs under the high deductible health plan, including annual deductibles, copayments and coinsurance. You may also use your HSA funds to pay for medical care that is not covered under the medical plan design but is considered a deductible medical expense for federal income tax purposes under Section 213(d) of the Internal Revenue Code of 1986, as amended from time to time. Such expenses are "qualified health expenses".
Please see the description of "Additional medical expense coverage available with your Health Savings Account, for additional information. HSA funds used for such purposes are not subject to income or excise taxes.
"Qualified health expenses" only include the medical expenses of you and your eligible dependents, meaning your spouse and any other family members whom you are allowed to file as dependents on your federal tax return, as defined in Section 152 of the Internal Revenue Code of 1986, as amended from time to time.
HSA funds may also be used to pay for non-qualified health expenses but will generally be subject to income tax and a 20% additional tax unless an exception applies (i.e., your death, your disability, or your attainment of age 65).
The following are examples of qualified medical that are covered by IRC Sections 213 and 223:
- medical services provided by medical practitioners and that are not covered by another plan
- charges for medically necessary services not covered by another plan, including but not limited to the following:
- out-of-pocket expenses
- charges exceeding reasonable and customary amounts
- charges exceeding plan limits
- prescription drug charges
- other non-covered charges for qualified medical care
- all medically necessary prescription drugs and certain other prescription drugs permitted by the IRS (e.g., contraceptives and pre-natal vitamins)
- eye exams, glasses (frames and lenses), contact lenses and solutions for contact lenses, lubricant eye drops, eye patches and reading glasses
- LASIK eye surgery
- dental implants
- dental treatment, routine dental care (cleaning, X-rays, fillings, etc.), and over-the-counter products such as toothache relief, temporary filling, denture adhesive
- orthodontia (braces)
- mouth guards
- hearing exams, hearing aids
- cost differences between semi-private and private hospital rooms
- costs for special medical equipment installed in your home, or for home improvements for purposes of medical care, e.g., ramps, support bars, railings, etc.
- fees for special schools on the recommendation of a physician, including schools for the mentally impaired, physically disabled or individuals with severe learning disabilities
- transportation (amounts paid for travel primarily for, and essential to, medical care)
- personal use items if primarily used to prevent or alleviate a physical or mental defect or illness, e.g., wigs, Braille books, hearing aids
- nursing services in hospital, nursing home or your home
- smoking cessation programs
- weight loss programs (if you have a letter from your treating physician indicating medical necessity)
- alternative medicine
- Christian Science practitioners
- long-term care insurance premiums (Note: the tax-free reimbursement cannot exceed the annually adjusted "eligible long-term care premiums" in the Internal Revenue Code. This amount is based on age.)
- COBRA premiums
- Medicare premiums
- health premiums while you are receiving unemployment insurance
- retiree medical plan premiums other than for Medigap insurance.
- periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals
- routine prenatal and well-child care
- flu shots (if not covered by your medical plan)
- child and adult immunizations
- screenings for conditions such as:
- heart and vascular diseases
- infectious diseases
- mental health conditions
- substance abuse
- metabolic, nutritional, and endocrine conditions
- musculoskeletal disorders
- obstetric and gynecological conditions
- pediatric conditions
- vision and hearing disorders
- preventive over-the-counter expenses, such as:
A complete description of, and a definitive and current list of what constitutes eligible medical expenses, is available in IRS Publication 502 which is available from any regional IRS office or IRS website.
If you receive any additional medical services that are not covered under your medical plan and you have funds in your HSA, you may use the funds in your HSA to pay for the eligible medical expenses. If you choose not to use your HSA funds to pay for any Section 213(d) expenses that are not covered health services, you will still be required to pay the provider for services.
The monies paid for these additional medical expenses will not count toward your annual deductible or out-of-pocket maximum.
You have the option of using funds in your HSA to pay for non-qualified health expenses. A non-qualified health expense is generally one which is not a deductible medical expense under Section 213(d) of the Internal Revenue Code of 1986. Any funds used from your HSA to pay for non-qualified expenses will be subject to income tax and a 20% additional tax unless an exception applies (i.e., your death, your disability, or your attainment of age 65).
In general, you may not use your HSA to pay for other health insurance, including Medicare Supplemental insurance, without incurring a tax except you may use your HSA to pay for COBRA premiums and Medicare Parts A, B or D premiums (but only if the account holder and Medicare enrollee are age 65 or older).
The following are examples of expenses that would not qualify for a tax-free withdrawal from your Health Savings Account:
- contributions to other employer-sponsored dental, vision or medical plans, including plans sponsored by your spouse's employer (contributions to the Company's dental, vision and medical plans are already made on a before-tax basis)
Exceptions: COBRA premiums, Medicare premiums, health premiums while you are receiving unemployment insurance, retiree medical plan premiums other than for Medigap insurance and certain long-term care insurance premium amounts are considered qualified expenses.
- costs you deduct as qualified medical expenses on your federal income tax return
- expenses not eligible to be deducted under federal tax law
- expenses reimbursed by any other health plan
- health club membership dues
- cosmetic surgery: electrolysis, hair removal or transplants, liposuction, etc.
- vitamins and other dietary supplements, toiletries and cosmetics that are not medically necessary
- medications purchased merely to maintain you or your family's health
- prescription drugs that are not medically necessary and not permitted by the IRS (such as Rogaine)
- cosmetic dental work (including bleaching, bonding and veneers)
- undocumented travel to or from your physician's office or other medical facility
- weight loss programs (unless you have a letter from your treating physician indicating medical necessity)
If you do not use all of the funds in your HSA during the calendar year, you do not lose the balance remaining in your HSA. If your employment terminates for any reason, the funds in your HSA will continue to be owned and controlled by you, whether or not you elect COBRA coverage for the accompanying high deductible health plan, as described in this Benefits Summary. COBRA does not apply to the HSA because the benefit is not an ERISA plan.
However, if you elect COBRA, your remaining HSA funds can be used to assist you in paying your out-of-pocket costs under the medical plan and COBRA premiums while COBRA coverage is in effect.
Be sure to keep your receipts and medical records. If these records verify that you paid qualified health expenses using your HSA, you can deduct these expenses from your taxable income when filing your tax return. However, if you cannot demonstrate that you used your HSA to pay qualified health expenses, you may need to report the distribution as taxable income on your tax return. Stryker and UnitedHealthcare will not verify that distributions from your HSA are for qualified health expenses. Consult your tax advisor to determine how your HSA affects your unique tax situation.