Can You Use an FSA on Prescriptions?

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows individuals to set aside pre-tax money from their paycheck to pay for eligible healthcare expenses. FSAs serve as a valuable tool for managing out-of-pocket medical costs for the account holder, their spouse, and dependents. The funds within an FSA can be used for a wide range of medical, dental, and vision expenses.

Qualifying Prescriptions

Most medications requiring a prescription are eligible for reimbursement through a Flexible Spending Account. This includes both brand-name and generic prescription drugs. For an item to qualify as a “prescription” for FSA purposes, it generally needs to be ordered by a licensed healthcare provider to treat a specific medical condition. Insulin, for instance, is always eligible for reimbursement without a separate prescription. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, significantly expanded the eligibility of over-the-counter (OTC) medications and feminine hygiene products. This legislation permanently removed the previous requirement for a doctor’s prescription for many OTC drugs, making items like pain relievers, cold medicines, and antacids directly eligible for FSA use. When seeking reimbursement for prescribed medications, documentation such as a detailed summary from the pharmacy, an itemized receipt showing the prescription number, or a medication label linking to the purchase receipt is often required.

Making Payments with Your FSA

Utilizing your FSA funds for eligible expenses typically involves one of two primary methods: using a dedicated FSA debit card or submitting a claim for reimbursement. Many FSA plans provide a debit card, which functions similarly to a regular bank card at the point of sale, often automatically substantiating purchases. However, even with a debit card, it is prudent to retain all itemized receipts as the plan administrator may request them for verification purposes. Alternatively, individuals can pay for eligible expenses out-of-pocket and then submit a claim to their FSA administrator for reimbursement. This process requires providing specific documentation, such as an itemized receipt from the pharmacy or provider, which details the service or product, the date of purchase, and the cost.

Other Covered Health Expenses

Beyond prescriptions, Flexible Spending Accounts cover a broad spectrum of other health-related products and services that qualify as medical care under IRS guidelines. Common eligible expenses include medical co-payments and deductibles for doctor visits, hospital stays, and diagnostic tests like X-rays or lab work. Dental care, such as cleanings, fillings, and orthodontia, along with vision care, including eye exams, prescription eyeglasses, and contact lenses, are also generally covered. Certain medical equipment and supplies needed for treatment or prevention of illness, like crutches, bandages, and blood sugar test kits, are typically eligible. Some “dual-purpose” items, which can be used for general health or cosmetic purposes, may still require a Letter of Medical Necessity (LMN) from a healthcare provider to be eligible.

Expenses Not Covered by FSA

While FSAs offer broad coverage for healthcare costs, certain expenses are generally not eligible for reimbursement. Cosmetic procedures, those primarily aimed at improving appearance and not for treating a disease or injury, are typically excluded. Health club memberships, even if they promote general wellness, are also usually not covered, unless specifically prescribed by a doctor for a diagnosed medical condition with a Letter of Medical Necessity. Over-the-counter vitamins and supplements are generally ineligible unless prescribed by a medical professional to treat a specific medical condition. Premiums paid for health insurance, including those for long-term care insurance, cannot be paid with FSA funds.