Can You Use an FSA for Out-of-Network Expenses?

A Flexible Spending Account (FSA) allows employees to contribute pre-tax dollars from their salary to cover eligible healthcare expenses. These funds are designated for qualified medical costs for the account holder, their spouse, and dependents.

Qualifying Out-of-Network Services

An expense is eligible for FSA reimbursement if it qualifies as medical care under Internal Revenue Service (IRS) regulations, regardless of whether the provider is in-network or out-of-network. The IRS defines medical care broadly, covering services for the diagnosis, cure, mitigation, treatment, or prevention of disease, and treatments affecting any body structure or function. Common medical services like visits to a general practitioner or specialist, prescription medications, dental work, and vision care are eligible, even when accessed through an out-of-network provider. The key factor is the medical necessity of the service, not the provider’s network status.

To substantiate an out-of-network claim for FSA reimbursement, detailed documentation, such as an itemized receipt or “superbill” from the healthcare provider, is required. The documentation must specify the date the service was rendered, a description of the service or treatment received, the provider’s full name and address, and the cost for each service. For prescription medications, the receipt should also include the drug name, its dosage, the dispensing pharmacy’s name, and the amount paid. Without these details, the claim may be denied due to insufficient substantiation.

The requirement for an expense to be eligible is that it must serve a medical purpose as defined by IRS Publication 502, not for general health improvement or cosmetic reasons. For instance, a medically necessary surgical procedure performed by an out-of-network specialist would qualify, whereas elective cosmetic surgery or a general health club membership would not. Maintaining records that link the expense to a diagnosed medical condition or treatment plan is important for successful reimbursement and to withstand any audit by the FSA administrator.

Submitting Your Reimbursement Claim

After gathering documentation for an eligible out-of-network expense, submit a reimbursement claim to the FSA administrator. Most FSA plans offer submission methods, including secure online portals for uploading scanned receipts and claim details. Claims can also be submitted via mail with a completed paper claim form and itemized receipts to the administrator’s designated address.

Complete a claim form provided by the FSA administrator, entering details like the patient’s name, service type, date of service, and amount requested. The itemized receipts or superbills supporting the claim are then attached to this form. After submission, the administrator reviews the claim and documentation to verify eligibility against IRS guidelines and the employer’s FSA plan rules.

Upon claim approval, reimbursement funds are dispersed to the account holder. This occurs through direct deposit into a bank account or by mailed check. Processing times for claims vary, typically from a few business days to two weeks from the submission date.

Essential Considerations for Claims

Understanding FSA administrative details is important for successful reimbursement, especially for out-of-network expenses. FSAs operate on a defined 12-month plan year, and funds must be used or forfeited by the end of this period, typically by December 31st. Many plans offer a “run-out” period, commonly 90 days, after the plan year ends for submitting claims for previously incurred expenses. This period is solely for submitting claims, not for incurring new expenses.

Maintaining organized records of all healthcare expenses and submitted claims is important for compliance and future inquiries. This includes keeping digital or physical copies of:

• Itemized receipts
• Superbills
• Explanation of benefits (EOBs) from insurance
• Any correspondence related to claims

Good record-keeping is valuable if the FSA administrator requires additional information or clarification, serving as proof of payment and service.

FSA administrators are required to ensure reimbursements are for eligible medical expenses, a process called substantiation. They may request further documentation or clarification for certain claims, especially for larger amounts or unusual services. Responding promptly and accurately to these requests with supporting details, like a doctor’s letter of medical necessity, helps prevent delays or denials and maintains the funds’ tax-advantaged nature.