Can I Use FSA for Cosmetic Surgery?

Flexible Spending Accounts (FSAs) help manage healthcare costs. A common question is whether cosmetic surgery qualifies for FSA reimbursement. Not all cosmetic procedures are eligible, so understanding the rules is essential. This guide clarifies FSA coverage for cosmetic procedures.

Flexible Spending Accounts Overview

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows employees to set aside pre-tax money from their paycheck to pay for qualified medical expenses. This arrangement reduces taxable income, leading to tax savings. Funds contributed to an FSA are available at the beginning of the plan year, even before the money is fully deducted from an employee’s salary.

FSAs operate under a “use-it-or-lose-it” rule, meaning funds must be spent by the end of the plan year or they are forfeited. However, employers may offer exceptions, such as a grace period of up to two and a half months into the next plan year, or a limited carryover amount to the following year. For plan years beginning in 2024, employees can contribute up to $3,200, and the maximum carryover amount is $640, though employers can set lower limits for both. These accounts cover common eligible expenses like doctor visits, prescription medications, dental care, and vision care, as defined by IRS regulations.

What Qualifies as Cosmetic Surgery

Cosmetic surgery refers to procedures performed solely to improve appearance, without addressing a physical defect or illness. Examples include facelifts, liposuction, breast augmentation for aesthetic reasons, and rhinoplasty (nose reshaping) done solely to alter one’s looks.

Their main purpose is to enhance physical appearance. They do not involve the diagnosis, cure, mitigation, treatment, or prevention of disease. The focus remains on elective changes to improve self-perception or physical attractiveness.

FSA Rules for Cosmetic Surgery

Expenses for cosmetic surgery are generally not eligible for reimbursement through an FSA. This applies to procedures aimed at improving appearance that do not promote proper body function or treat an illness. The IRS clarifies that elective and cosmetic surgeries are not considered deductible medical expenses.

There is an exception to this rule: cosmetic procedures may qualify for FSA reimbursement if they are medically necessary. A procedure is deemed medically necessary when it is performed to alleviate a physical or mental illness, injury, or congenital deformity. Examples include reconstructive surgery following an accident, breast reduction surgery performed to alleviate severe back pain, or rhinoplasty to correct breathing difficulties. Similarly, breast reconstruction after a mastectomy for cancer is considered a medically necessary procedure.

Proving Medical Necessity for Reimbursement

To obtain FSA reimbursement for a procedure that might otherwise be considered cosmetic, medical necessity must be substantiated. This requires thorough documentation from a qualified medical professional. The documentation must establish that the procedure is a direct treatment for a specific medical condition, injury, or deformity, not solely for aesthetic purposes.

A physician’s letter is essential, outlining the patient’s medical diagnosis. This letter must explain how the procedure directly relates to treating that specific medical condition, illness, or injury, rather than enhancing appearance. Medical or diagnostic codes, such as those from the International Classification of Diseases, Tenth Revision (ICD-10), are used to identify the patient’s condition and support medical necessity. Secure all necessary supporting medical records and physician statements before submitting a claim to the FSA administrator.