Before you get too excited about this one, over-the-counter drugs are generally not qualified as an HSA medical expense. However, if an HSA owner gets a prescription for an over-the-counter drug, it is a qualified medical expense.
As an aside, an exception to the general rule that OTC drugs are not eligible is insulin. An HSA owner can purchase insulin without a prescription as an eligible expense.
2. Weight-loss supplements, nutritional supplements and vitamins
Generally, weight-loss supplements, nutritional supplements, and vitamins are used for general health and are not qualified HSA expenses. HSA owners usually cannot include the cost of diet food or beverages in medical expenses because these substitute for what is normally consumed to satisfy nutritional needs.
However – there can be exceptions to this rule:
Food: HSA owners CAN include the cost of special food if: (1) the food does not satisfy normal nutritional needs, (2) the food alleviates or treats an illness, and (3) the need for the food is substantiated by a physician. The substantiation by a physician should include a written prescription or order.
Vitamins and supplements: If the nutritional supplements are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a doctor, then they may be qualified.
3. Over-the-counter non-drug items
Although over-the-counter drugs are generally not eligible HSA expenses, over-the-counter items that are not medicines still qualify. Any non-drug over-the-counter items must meet the definition of “medical care”. The definition includes expenses for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body. This may include items such as crutches, bandages, breast pumps and blood pressure monitors. However, expenses for items that are merely beneficial to the general health of an individual, such as a piece of exercise equipment, are not eligible expenses.
Watch the video below to see what is covered under an HSA
4. General health expenses
Cardiac rehabilitation: Prescribed by an MD, usually after a heart attack, at a registered centre.
Weight-loss programs: HSA owners cannot include payments to lose weight unless the weight-loss is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). If the weight-loss treatment is not for a specific disease diagnosed by a physician, the HSA owner cannot include the fees paid for membership in a weight reduction group or fees for attendance at period meetings.
Family planning: Most family planning classes or other expense are not likely to be qualified – however, there is an exception for HSA owners that are already pregnant as well an exception for most medical expenses related to infertility. Expenses for childbirth classes are reimbursable, but are limited to expenses incurred by the mother-to-be. Expenses incurred by a “coach,” even if that is the father-to-be, are not qualified. To qualify as medical care, the classes must address specific medical issues, such as labour, delivery procedures, breathing techniques, and nursing.
Stress reduction: Stress reduction items are generally not qualified medical expenses because they are designed to improve general health rather than curing a particular illness or condition. That said, items that are medically necessary for a particular condition can be included, such as a massage from a certified provider for treating sore muscles.
5. Travel expenses
The cost of travel can be a qualified medical expense if the transportation and trip are primarily for, and essential to medical care. This can include the cost of tickets for bus, taxi, train, plane, or ambulance. HSA owners can also include the out-of-pocket costs for car expenses such as gas and oil, parking, and tolls. HSA owners cannot include depreciation, insurance, general repair, or maintenance.
6. Cosmetic procedures
Generally, cosmetic surgery is not qualified. This includes any procedure that is directed at improving the patient’s appearance and does not meaningfully promote the “proper function of the body or prevent or treat illness or disease.” However, cosmetic surgery that is necessary to improve a deformity arising from a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease is eligible. As an example: Anne undergoes surgery that removes a breast as part of treatment for cancer. She pays a surgeon to reconstruct the breast. The surgery to reconstruct the breast corrects a deformity directly related to the disease. The cost of the surgery is an eligible medical expense.
Clearly, there are exceptions to the rules for qualified medical expenses of which an HSA owner can avail themselves. To maximize the value of the Health Savings Account, it is prudent that the owner take some pro-active steps including:
Doing the “homework” to ascertain and verify what expenses will meet the test as a “qualified expense”
Working with his or her doctor or health professional to gain the necessary authorizations or prescriptions; and
Save those records – make sure that comprehensive and detailed records such as prescriptions, letters, and receipts are kept in the event of a CRA audit
In this manner, the HSA owner will ensure the maximum value of the account and hopefully be able to keep more of his or her hard-earned dollars.