Why aren't appearance improvements eligible for reimbursement?
Appearance improvements, or cosmetic procedures, are known by the Internal Revenue Service (IRS) as any procedure that is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. Consumer spending accounts were designed to help people save money on eligible medical expenses to prevent or treat a specific medical condition, so cosmetic procedures that have no role in improving a person's long-term health prospects are typically never covered under any of these accounts.
However, there are rare cases when these types of procedures may be covered, but this is typically a judgment call on the part of the benefits administrator (following what’s covered in the Summary Plan Description) and may require a Letter of Medical Necessity (LMN) from a doctor for full reimbursement. If the appearance improvement is necessary to improve a deformity due to a congenital abnormality, personal injury/trauma or disfiguring disease, the procedure may be eligible under a flexible spending account (FSA), health savings account (HSA) or health reimbursement arrangement (HRA).
How do I obtain a Letter of Medical Necessity (LMN)?
If a physician suggests appearance improvements as a means of preventing or treating a specific medical condition, a Letter of Medical Necessity (LMN) will be required for FSA, HSA and HRA reimbursement. This letter must outline how appearance improvements will be used to alleviate the issue, improve the individual's quality of life, and how long the treatment will last. If additional treatment will be needed outside the current plan year, another LMN will have to be provided to the benefits administrator to cover the duration of the treatment.