Introducing the Venteur Health Wallet

Understanding 213-D Reimbursements

The concept of 213-D reimbursements originates from Section 213(d) of the Internal Revenue Code(1). It enables employers to provide their employees with tax-free reimbursements for qualified medical expenses. (Emphasis on qualified. We’ll explain more about this later on in the article).

The regulation allows employers to establish a plan that allows their employees to receive reimbursements for qualified medical expenses incurred by themselves and their dependents. These reimbursements are not subject to any tax, whether income tax, Social Security tax, Medicare tax, or federal unemployment tax. By providing tax-free reimbursements, employers effectively reduce the financial burden on their employees regarding healthcare expenses.

Unlike traditional healthcare insurance plans, 213-D Reimbursements offer flexibility by empowering individuals to manage their healthcare funds directly. Employees receive a designated amount of money in a virtual "Health Wallet," which they can use for various health-related purposes. This approach encourages proactive healthcare choices and gives individuals control over their healthcare spending.

Eligible Medical Expenses Under 213-D Reimbursements

The IRS Tax Code 213-D determines the eligibility of reimbursable expenses. Nevertheless, your former employer may not include all 213-D costs as eligible for reimbursement from your reimbursement account. Note that each employer sets criteria and guidelines regarding which expenses qualify for reimbursement.

IRS offers guidance and the HRA Council clarifies what falls under the category of "medical care" and is therefore eligible for reimbursement under a health flexible spending account (health FSA) or health savings account (HSA). The list of reimbursable expenses has evolved with time, and the IRS guidance determines which expenses can be reimbursed. Under the IRS provisions, individuals are eligible for tax deductions on medical care expenses not covered by insurance.

In this case, the term "medical care" is defined as payments made for the diagnosis, cure, mitigation, treatment, or prevention of disease and for activities that aim to impact the structure or function of the body. However, according to Treasury Regulations, deductions are restricted to expenses primarily to prevent or alleviate physical or mental defects or illnesses. It's important to note that personal, family, or living expenses cannot be claimed as "medical care" deductions unless they fall within the definition outlined in Section 213.

Does Health and Wellness Coaching Qualify as Medical Care?

In 2022, IRS issued guidelines that would help a taxpayer determine if an expense, typically of a personal nature, qualifies as incurred for medical care. These factors include the following:

• The taxpayer's primary motive or purpose for incurring the expenditure.
• A medical condition diagnosed by a physician and their recommendation of the item as a treatment or means of mitigation.
• The interconnection between the treatment and the underlying ailment.
• The effectiveness of the treatment.
• The temporal closeness to the onset or reappearance of the disease.
• Whether the expenses incurred to diagnose, treat, mitigate, prevent, or alleviate the taxpayer's specific disease.
• Whether the costs are associated with diagnosing, treating, mitigating, preventing, or alleviating the taxpayer's disease.
• Whether the expenses primarily contribute to the taxpayer's overall well-being and could be classified as personal expenses rather than directly related to treating their specific medical condition.
• Whether the expense would not have been undertaken if not for the existence of the taxpayer's medical condition.

The guidance provided by the IRS will assist employers and third-party administrators in determining the reimbursable expenses that qualify as "medical care" for employer-provided health FSAs and HSAs. Health and wellness coaching is considered eligible for reimbursement through flexible spending accounts (FSA), health savings accounts (HSA), and health reimbursement accounts (HRA). However, you must obtain a letter of medical necessity from your doctor or healthcare professional to qualify.

Revised FSA-Approved Medical Expenses

March 2023 saw the release of updated guidelines by the Internal Revenue Service (IRS) concerning the eligibility of certain expenses related to substance abuse programs, exercise programs, wellness activities, and general health. These guidelines aim to determine if these expenses qualify as medical expenses under Section 213 of the Internal Revenue Code (Code). Such qualification enables reimbursement through Account-Based Plans, including health savings accounts (HSA), health care flexible spending accounts (FSA), and health reimbursement arrangements (HRA).

These frequently asked questions (FAQs) for Section 213 clarify the eligibility of medical services and products for deduction or reimbursement. The guidance emphasizes that a physician's prescription or recommendation is essential in determining whether an employee can utilize tax savings accounts to deduct or reimburse expenses. This principle also applies to medical services or products aimed at treating a disease a physician diagnoses.

Take Action Today

At Venteur, we are committed to empowering employees with top-notch, flexible health insurance while enabling employers cut costs and attract and retain top talent. It's time to ensure employees are adequately protected for the future so that they can perform at their best today. Join us in creating a world where everyone can thrive.

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