Is Scar Cream an FSA Eligible Expense?

A Flexible Spending Account (FSA) allows individuals to set aside pre-tax money for eligible medical expenses, reducing taxable income as contributions are deducted from paychecks. Typically offered through an employer, an FSA helps manage healthcare costs and save money on qualified services and products.

Understanding FSA Eligible Expenses

The Internal Revenue Service (IRS) defines what qualifies as a medical expense for FSA purposes. Generally, eligible expenses include costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, as well as for affecting any structure or function of the body. This definition emphasizes medical necessity, meaning the expense must be primarily for a legitimate health purpose, rather than for general health improvement or purely cosmetic reasons. For instance, while items beneficial to general health like vitamins are typically not eligible, medical supplies such as bandages are. Since January 1, 2020, over-the-counter medications no longer require a prescription to be eligible for reimbursement.

Scar Cream Eligibility Guidelines

Scar cream eligibility for FSA reimbursement depends on its intended use and medical necessity. It may qualify if used to treat a medical condition from an illness, injury, or deformity. For example, scar treatments for severe burns or surgical scars that impair movement or cause discomfort could be medically necessary. Cosmetic procedures, or those solely for appearance without addressing a medical condition, are generally not eligible.

For scar creams not clearly for a medical condition or considered cosmetic, a Letter of Medical Necessity (LMN) from a licensed healthcare provider is often required. This letter documents the scar cream’s necessity for diagnosis, treatment, or mitigation of a specific medical condition. An LMN should detail the medical condition, recommended treatment (including frequency and dosage), and duration for which the expense is needed.

Using Your FSA for Scar Cream

Accessing funds from your Flexible Spending Account for scar cream involves specific procedures. Many FSA plans provide a debit card, which functions like a regular debit card but is linked directly to your FSA balance and can be used at approved merchants for eligible medical expenses. When using an FSA debit card, some purchases may be automatically verified, especially at pharmacies or stores equipped with an Inventory Information Approval System (IIAS). However, even with a debit card, you may still need to substantiate the purchase later by providing proof that the expense was eligible.

If an FSA debit card is not available, or if a purchase requires additional documentation, you can submit a reimbursement claim. This typically involves paying for the scar cream out-of-pocket and then submitting a claim form to your FSA administrator. The claim form usually requires details such as the date of service, the provider or merchant, a description of the expense, and the amount charged. Reimbursement processing times can vary, but generally, administrators aim for timely processing once all required documentation is received.

Record Keeping for Reimbursement

Maintaining thorough records is important for FSA reimbursement and IRS compliance. For every scar cream purchase, keep itemized receipts showing the product name, date, amount, and vendor. Credit card receipts or canceled checks are usually insufficient due to lack of itemized detail. If a Letter of Medical Necessity (LMN) was required, retain a copy. These records are crucial for submitting your initial reimbursement claim and for potential audits by your FSA administrator or the IRS, ensuring proper substantiation of all expenditures.