Can You Use FSA for Dermatology? What’s Covered?

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 qualified out-of-pocket healthcare costs. This reduces taxable income, leading to potential tax savings. Funds contributed to an FSA can cover a wide range of eligible medical, dental, and vision expenses for the account holder, their spouse, and qualifying dependents. An FSA helps individuals manage and reduce healthcare expenditures by utilizing tax-advantaged dollars, including many dermatology-related expenses.

Eligible Dermatology Expenses

Many dermatology services, treatments, and products are eligible for FSA reimbursement if for medical care to diagnose, cure, mitigate, treat, or prevent a disease. This includes dermatologist visits for conditions such as acne, eczema, psoriasis, and rosacea, and their treatments. Medically necessary procedures like skin cancer screenings, biopsies, and mole or cyst removal for health concerns are typically covered. Prescription medications for dermatological conditions are also eligible.

Certain over-the-counter (OTC) products may also qualify for FSA reimbursement, especially if prescribed or recommended by a healthcare provider for a specific medical condition. For items not automatically eligible, a Letter of Medical Necessity (LOMN) is often required. A LOMN is a formal document from a licensed healthcare provider explaining why a particular treatment, product, or service is essential for a patient’s health and well-being, rather than for general health or cosmetic purposes.

A LOMN should contain specific details to substantiate the medical necessity, including patient and provider information, the medical condition, and the recommended treatment or product. This helps ensure the expense aligns with IRS guidelines for medical care.

Ineligible Dermatology Expenses

Not all dermatology-related expenses qualify for FSA reimbursement, particularly those considered cosmetic rather than medically necessary. The Internal Revenue Service (IRS) generally differentiates between expenses for medical care and those primarily for aesthetic enhancement. Procedures intended solely to improve appearance, without addressing a specific illness, injury, or medical condition, are typically not eligible.

Common examples of ineligible expenses include elective cosmetic surgeries such as facelifts, liposuction, and breast augmentation. Botox injections, when used purely for wrinkle reduction, are also generally excluded unless prescribed to treat a medical condition like chronic migraines or excessive sweating. Non-medicated skincare products, toiletries, and general beauty treatments like chemical peels or microdermabrasion performed solely for cosmetic reasons are not covered. Hair removal procedures, such as laser hair removal or electrolysis, are also typically ineligible unless deemed medically necessary to treat a disfiguring condition.

Expenses that are merely beneficial to general health or for personal enjoyment do not qualify. Therefore, even if a service is performed by a dermatologist, its eligibility hinges on its medical purpose rather than its aesthetic outcome.

Submitting for Reimbursement

After incurring eligible dermatology expenses, the next step involves submitting a claim for reimbursement from your FSA. It is important to retain all original receipts and supporting documentation, such as Explanation of Benefits (EOBs) from your insurance provider, which detail the services received and amounts paid. If a Letter of Medical Necessity (LOMN) was required for a particular expense, ensure this document is also ready to be submitted. These records serve as proof of the expense and its medical necessity.

Most FSA administrators offer several convenient methods for submitting claims, including online portals, dedicated mobile applications, or traditional mail and fax options. When using an online portal or app, you will usually be prompted to upload digital images of your receipts, EOBs, and any necessary LOMNs. Some FSA plans provide a benefits debit card for direct payment at the point of sale, though you should still keep receipts for verification if requested.

Upon submission, the FSA administrator reviews the claim and supporting documentation to ensure it meets IRS guidelines and the terms of your specific plan. Processing times can vary, but reimbursements are often issued within a few business days. It is advisable to monitor your FSA account balance and statements regularly to track reimbursements. Many FSAs operate under a “use-it-or-lose-it” rule, often with a grace period or limited rollover option for unused funds.