A Health Care Spending Account (HCSA) is a valuable tool for managing your out-of-pocket health care expenses. It allows you to set aside pre-tax money to pay for eligible medical costs, effectively reducing your taxable income and saving you money on health care. To help you better understand this benefit, we’ve compiled answers to some frequently asked questions about HSAs.
Frequently Asked Questions About Health Care Spending Accounts
Does a Health Care Spending Account Replace My Health Insurance Plan?
No, a Health Care Spending Account is not a replacement for your health insurance. Instead, it works in conjunction with your health plan. Think of it as a supplementary account designed to cover eligible health care expenses that your insurance plan doesn’t fully cover. You should always submit your medical claims to your primary health insurance first. Once your insurance has processed the claim and you know the remaining balance you owe, you can then use your HCSA to pay for those outstanding eligible expenses. It’s important to note that you cannot use your HCSA to get reimbursed for expenses that have already been, or will be, covered by your health insurance or any other source.
Do I Need to Be Enrolled in a Specific Health Insurance Program to Participate in an HCSA?
Eligibility for an HCSA is often separate from your health insurance plan enrollment. Generally, you are not required to be enrolled in a particular health insurance program to take advantage of an HCSA. This means even if you have health coverage through another source, you may still be eligible to enroll in and benefit from an HCSA.
Can I Use My HCSA to Pay for Family Expenses Even If My Spouse Has Other Health Insurance?
Yes, absolutely. Your HCSA can be used to reimburse eligible health care expenses for yourself, your spouse, and eligible dependents, regardless of whether you or your spouse have health insurance coverage elsewhere. The benefit of an HCSA extends to your family’s health care needs, providing a financial advantage for managing medical costs across your household.
If Both My Spouse and I Are Eligible Employees, Can We Both Enroll in Separate HSAs?
Yes, if both you and your spouse are eligible employees, you can each enroll in your own Health Care Spending Account. This can potentially increase the total pre-tax funds your family can allocate to health care expenses. However, it’s crucial to remember that even if you both have HSAs, each individual health care expense can only be reimbursed once. You cannot submit the same expense to both accounts for double reimbursement.
Who Qualifies as an Eligible Dependent for HCSA Reimbursements?
An HCSA can reimburse health care expenses for you, your spouse, and dependents as defined by the Internal Revenue Code. This generally includes your qualifying child or qualifying relative. It’s important to consult the IRS guidelines or your HCSA plan documents for the precise definition of a qualifying child or relative to ensure expenses for your dependents are eligible for reimbursement.
Are Expenses for My Domestic Partner Reimbursable Through My HCSA?
The eligibility of a domestic partner’s health care expenses for HCSA reimbursement depends on whether your domestic partner qualifies as your dependent according to the Internal Revenue Code. If your domestic partner meets the IRS definition of a dependent, then their eligible health care expenses can be reimbursed through your HCSA. Review the IRS guidelines on dependent status for a clear understanding of eligibility in your specific situation.
Can HCSA Reimbursed Expenses Be Claimed as a Medical Expense Deduction on My Tax Return?
No. Expenses that are reimbursed through your HCSA cannot be deducted as medical expenses on your tax return. This is because you’ve already received a tax advantage by using pre-tax dollars from your HCSA to pay for these expenses. To avoid double benefits, only out-of-pocket medical expenses that are not reimbursed by insurance, your HCSA, or any other source are eligible for a medical expense deduction on your income tax return.
What If My Medical Expenses Change During the Plan Year? Can I Adjust My HCSA Contributions?
Unfortunately, no. According to IRS regulations governing Health Care Spending Accounts, a change in your medical expenses during the plan year is not considered a qualifying event that allows you to change your HCSA contribution amount. This means if you experience unexpected higher medical costs, you cannot increase your HCSA contributions mid-year to compensate. Conversely, if your medical expenses are lower than anticipated, you cannot decrease your contributions either. Careful planning and estimation of your annual health care expenses during enrollment are essential.
If I Experience a Qualifying Life Event, Can I Change My HCSA Contribution Amount?
Yes, you may be able to adjust your HCSA contribution if you experience a qualifying life event, but the change must be consistent with the event itself. IRS rules dictate that the HCSA administrator must treat the period before and after the qualifying event as two separate coverage periods for reimbursement purposes. Examples of qualifying events typically include changes in marital status, number of dependents, or employment status (of yourself or your spouse). Consult your HCSA plan documents or administrator to understand which events qualify and how to make changes.
If I Become Eligible for an HCSA Mid-Year, Can I Enroll Outside of the Open Enrollment Period?
No, generally, you cannot enroll in an HCSA mid-year if you were not eligible during the open enrollment period. A change in eligibility itself is not considered a qualifying event that allows for enrollment outside of the standard open enrollment window. HCSA enrollment is typically limited to the annual open enrollment period unless you experience a qualifying life event that newly grants you eligibility and allows for a mid-year enrollment change according to plan rules.
What Happens to My HCSA If I Leave My Job or Retire?
Your HCSA coverage typically ends when you are no longer on the payroll and stop making contributions to your account. However, there are ways to plan ahead. During open enrollment, you can choose to contribute your entire annual election amount within the paychecks you expect to receive before leaving. This allows you to continue using your HCSA for eligible expenses incurred even after you leave employment.
If you don’t pre-fund your account, you may have the option to continue participating in the HCSA through COBRA. This involves making after-tax payments directly to the HCSA administrator to maintain your coverage. Carefully consider your options and plan ahead during enrollment if you anticipate changes in your employment status.
As an Adjunct Professor with Summer Breaks, How Does This Affect My HCSA?
If you are an adjunct professor and do not receive paychecks during the summer, your HCSA participation can be affected. Your coverage will typically end when your payroll contributions stop at the end of the spring semester. To maintain continuous coverage, you need to plan proactively during open enrollment. On your enrollment application, select a shorter payroll period to complete your annual contributions by the end of the spring semester. This pre-funding strategy will ensure your HCSA coverage continues uninterrupted throughout the summer months, even without summer paychecks.
If I Leave My Job, Can I Still Use the Funds in My HCSA?
If you leave state service, retire, take unpaid leave, or stop contributing to your HCSA for any reason, the funds remaining in your account can only be used for eligible health care services you received before your payroll contributions ceased.
However, if you arrange to continue contributing to your HCSA after leaving employment (either through after-tax COBRA payments or by pre-paying your annual election), you can then submit claims for services received after you leave your state job, up to the amount you’ve contributed. The key is whether you continue contributing to the account to maintain active participation.
Can I Get Reimbursed for Services Received Before the Current Plan Year?
No. IRS rules are clear that qualified medical expenses are considered “incurred” when the service is provided, not when you are billed or when you pay for it. Therefore, reimbursements within a specific plan year are only for eligible medical services received within that same plan year. Services received in a previous plan year, even if billed or paid for in the current year, are not eligible for reimbursement from the current plan year’s HCSA.
What About Upfront Payments for Health Care Services Delivered Over Multiple Plan Years?
Even if you pay upfront for health care services that will be delivered over multiple plan years, you can only be reimbursed from your HCSA as the services are actually provided within a given plan year. IRS regulations prevent HCSA reimbursement for expenses before they are incurred. Expenses are considered incurred as treatment is rendered, regardless of when you made the payment. This means for services spanning multiple plan years, reimbursement will be spread out over those years, corresponding to the portion of treatment delivered in each plan year.
How Does HCSA Reimburse for Orthodontic Costs, Especially with Monthly Payment Plans?
Orthodontic expenses are eligible for HCSA reimbursement. To initiate reimbursement, especially at the start of treatment, you’ll need to provide a copy of the service contract with the orthodontist, outlining the payment schedule.
For monthly payment plans, HCSA reimbursement typically occurs after each monthly payment is due. However, if you pre-pay the entire orthodontic treatment upfront, reimbursement in a given plan year is limited to the value of services provided within that plan year. You’ll need to submit a claim each month for the pro-rated amount corresponding to that month’s services, as automatic reimbursement is not provided.
Are Dental Implants Eligible for Reimbursement?
Yes, dental implants are generally reimbursable under an HCSA, provided they are considered a medical necessity and not solely for cosmetic purposes. As long as the dental implants are intended to restore proper dental function or address a medical dental condition, they typically qualify as eligible expenses for HCSA reimbursement.
Will My HCSA Cover Prescription Drug Costs Not Fully Covered by My Insurance?
Yes, your HCSA can reimburse the cost of prescription drugs, even for the portion your health insurance doesn’t cover. As long as the prescription drug is used to treat a medical condition, it is generally eligible for reimbursement. However, prescription drugs used primarily for cosmetic purposes are not reimbursable.
Can Over-the-Counter (OTC) Drugs, Herbal Medicines, and Homeopathic Remedies Be Reimbursed?
Over-the-counter (OTC) drugs, medicines, and biologicals are eligible for reimbursement through an HCSA. Dietary supplements and vitamins are also reimbursable if they are recommended by a doctor to treat a specific medical condition. For dietary supplements and vitamins, you’ll typically need to submit a Letter of Medical Necessity from your doctor with your reimbursement claim. However, herbal medicines and homeopathic remedies are generally not considered reimbursable expenses under an HCSA.
Are Medical Travel Expenses Reimbursable?
Yes, travel expenses related to medical care can be reimbursed from your HCSA. The IRS allows reimbursement for transportation costs that are primarily for and essential to receiving medical care. This includes expenses like car mileage (check for the current standard medical mileage rate, e.g., 21 cents per mile in 2024), parking fees, tolls, subway, bus, train, and even air travel and lodging if these costs are primarily incurred to obtain medical treatment. Keep detailed records of your medical travel expenses for reimbursement claims.
Will My HCSA Pay for Upgrades to Prescription Glasses?
Yes, you can use your HCSA to be reimbursed for upgrades or add-ons to your prescription eyeglasses. This includes costs for features like scratch-resistant coatings or other lens enhancements. There is typically no dollar limit on reimbursable upgrades or add-ons for prescription lenses and frames. However, non-prescription glasses, warranties, and sunglasses are not eligible for reimbursement through an HCSA.
