When Is Skin Tag Removal FSA Eligible?

Flexible Spending Accounts (FSAs) offer a tax-advantaged way to pay for healthcare expenditures. Participants set aside pre-tax money for qualified medical costs. This article clarifies when skin tag removal is an eligible FSA expense.

Understanding Flexible Spending Accounts and Eligible Expenses

An FSA is a pre-tax savings vehicle for healthcare expenses. FSA funds are typically exempt from federal income, Social Security, and Medicare taxes, offering savings on out-of-pocket medical costs. These accounts are usually offered through an employer, allowing employees to elect a certain amount to be deducted from their gross pay.

The IRS defines “eligible medical expenses” as costs for the diagnosis, cure, treatment, or prevention of disease, or for affecting any body structure or function. Common examples of eligible expenses include prescription medications, doctor and dentist office visits, vision care, and certain over-the-counter medications when accompanied by a prescription. For a procedure like skin tag removal to qualify, it must align with these IRS guidelines.

A determining factor for FSA eligibility, particularly for procedures that might have both cosmetic and medical applications, is the concept of medical necessity. This means the service or item must be required to treat a medical condition, disease, or injury, rather than being performed solely for aesthetic enhancement.

Skin Tag Removal and Medical Necessity

Skin tag removal is generally eligible for FSA reimbursement only when deemed medically necessary by a qualified healthcare professional. Procedures performed solely for cosmetic reasons, such as improving appearance without addressing a medical concern, are typically not covered by FSA funds.

Medical necessity for skin tag removal arises when the tags cause symptoms or interfere with bodily functions. Examples include skin tags that are constantly irritated by clothing or jewelry, cause pain, bleed, become inflamed, or interfere with daily activities. If a healthcare provider suspects a skin tag might be malignant or precancerous, its removal also qualifies as medically necessary.

A doctor’s diagnosis and recommendation are paramount in establishing medical necessity. A written statement from a physician, outlining the medical reasons for the removal, is often required to substantiate the claim.

Submitting Claims for Reimbursement

The process begins with gathering documentation to support medical necessity and incurred costs. This documentation ensures compliance with FSA administrator requirements and IRS guidelines.

Required documents include a detailed doctor’s note or letter stating the medical necessity of the skin tag removal. This note should describe the symptoms or medical condition that necessitated the procedure. An itemized receipt from the healthcare provider is essential, detailing the service, date, and total cost. If health insurance covered a portion of the cost, an Explanation of Benefits (EOB) from the insurer should also be included.

Once all documentation is compiled, claims are usually submitted to the FSA administrator through an online portal, mobile app, mail, or fax. Reimbursement processing times can vary, but typically range from 3 to 10 business days after submission. It is also important to be aware of the “use it or lose it” rule, where most FSA funds must be used by the end of the plan year, although some plans may offer a grace period of up to 2.5 months or allow a carryover of a limited amount, such as up to $660 for the 2025 plan year.