IRS Publication 502, Medical and Dental Expenses, defines medical care for the purpose of deducting medical expenses and reimbursing medical expenses through programs such as HSAs and HRAs. Health Reimbursement Arrangements, or HRAs, are defined contribution plans through which employers can reimburse their employees for eligible medical expenses.
An HRA may reimburse expenses considered to be qualified medical expenses in IRS Publication 502, including premiums for qualified health insurance policies. This is outlined in IRS Publication 969.
Depending on the HRA plan a business offers, these benefits may vary. Generally, the company will specify which IRS-approved medical expenses are excluded from the plan. These should be listed in the employer's HRA plan document.
Through a Small Business HRA, however, a company provides reimbursement for all of the medical expenses listed in IRS Publication 502.
IRS Publication 502—Definition of Medical Expenses
IRS Publication 502 defines medical care for the purpose of deducting or reimbursing expenses.
According to the IRS, the definition of medical care is as follows:
(1) The term “medical care” means amounts paid—
A. For the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,
B. For transportation primarily for and essential to medical care referred to sub-paragraph (A),
C. For qualified long-term care services (as defined in section 7702B (c)), or
D. For insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in sub-paragraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B (b)).
HRA Expense Eligibility
IRS Publication 502 also provides a list of eligible and ineligible medical expenses. See the table below for a summary.
|Annual physical exam||Yes|
|Birth control pills||Yes|
|Body scan (for diagnostic testing)||Yes|
|Braille books and magazines||Potentially|
|Breast pumps and supplies (lactation expenses)||Yes|
|Breast reconstruction postmastectomy||Yes|
|Capital expenses to modify your home for a disability||Potentially|
|Car modifications for a disability||Potentially|
|Child care (for healthy baby)||No|
|Christian Science practitioner||Yes|
|Contact lenses (and solution)||Yes|
|Cosmetic surgery (medically unnecessary)||No|
|Dental treatment (except "teeth whitening," below)||Yes|
|Diagnostic devices (such as diabetes test kits)||Yes|
|Disabled dependent care expenses||Potentially|
|Electrolysis or hair removal||No|
|Eye surgery (vision correction)||Yes|
|Flexible spending account||No|
|Guide dog (or other service animal)||Potentially|
|Health club membership dues||No|
|Health coverage tax credit||No|
|Health savings accounts||No|
|Hearing-impaired television modifications||Potentially|
|Illegal operations and treatments||No|
|Inpatient hospital services||Yes|
|Intellectually and developmentally disabled housing||Potentially|
|Lead-based paint removal||Potentially|
|Legal fees for medical expenses||Potentially|
|Lifetime care—advance payments||Potentially|
|Lodging for medical treatment||Potentially|
|Meals (while receiving medical treatment at facility)||Yes|
|Medical information plan||Potentially|
|Medical savings accounts||No|
|Medications (prescribed only)||Yes|
|Medications from other countries||No|
|Operations (for medically necessary reasons)||Yes|
|Oxygen (necessary for medical condition)||Yes|
|Pregnancy test kits||Yes|
|Premium tax credit||Potentially|
|Smoking cessation programs (and prescriptions)||Yes|
|Substance abuse treatment (drug or alcohol)||Yes|
|Transportation (during medical treatments)||Potentially|
|Trips (to receive medical treatments)||Potentially|
|Tuition for special education||Potentially|
Editor's note: This post was originally published August 2013.
What questions do you have about which medical expenses can be reimbursed? Let us know in the comments section below.