Qualified Medical Expenses

Qualified medical expenses are defined by IRS Code, Section 213(d) and include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease for the purpose of affecting any structure or function of the body.

Qualified Medical Expenses**

Over the Counter(OTC) Medicines and Supply Expenses

With the passage of the Patient Protection and Affordable Care Act on March 23, 2010 there are important changes to qualified OTC expenses. Most OTC medicines will now require a prescription in order to be eligible for payment through your HSA. Some OTC items that still qualify WITHOUT a prescription are listed below:

Non-Qualified Expenses**

Expenses for items that are merely beneficial to the general health of an individual are not considered qualified expenses. If you use your HSA to pay for expenses that are not qualified you will have to pay income tax and a 20 percent penalty on the non-qualified purchase amount. Below are some examples of non-qualified expenses:

Documentation of Qualified Medical Expenses

The IRS requires that you keep itemized receipts to document your qualified withdrawals. Those receipts must include the date of service and the type of expense. Bankcard statements and estimates of expenses are not permitted.

Whose expenses are qualified?

Your qualified tax-free HSA* withdrawals may be for expenses incurred by you, your spouse or your eligible dependents (Section 152 of the federal tax code), regardless of whether or not they are covered under your health plan.

When are expenses qualified?

Your expenses are qualified when they are incurred after your HSA is established. Then, even if you lose eligibility to make contributions to your HSA, you may still spend the money you have accrued in your HSA to pay for qualified medical expenses, tax-free.*

Questions?

Contact your helpful UMB Healthcare Services customer support agent at 866.520.4HSA (4472).

*All mention of taxes is made in reference to federal tax law. State taxes may vary, consult your tax adviser for details.

**For additional details on what qualifies or doesn’t qualify as a medical expense see IRS tax publication 502: Medical and Dental Expenses on the web at irs.gov/publications.