Cosmetic Procedures: FSA Eligibility

What are the IRS regulations for cosmetic procedures?

In accordance with IRS regulations regarding taxable medical deductions, IRC 213(d) is especially relevant in regards to the eligibility of certain medical expenses like cosmetic procedures. Under IRS 213(d), medical care refers to:

"The term "medical care" means amounts paid for the diagnosis, cure, mitigation, treatment or prevention of a disease, or for the purpose of affecting any structure or function of the body."

This particular definition is vital in helping benefits administrators determine whether a specific medical procedure is eligible for reimbursement through consumer-directed healthcare accounts like FSAs, HSAs and HRAs. In the vast majority of cases, cosmetic procedures are not meant to prevent or treat a specific medical condition or are simply done for "general health" purposes, so therefore they are rarely covered by most consumer spending accounts.

How do I obtain a Letter of Medical Necessity (LMN) for cosmetic procedures?

In a small percentage of cases when a patient requires a cosmetic procedure as a result of a congenital abnormality, personal injury or disfiguring disease, it may be eligible with an FSA, HSA or HRA with a Letter of Medical Necessity. This letter must outline how an account holder's medical condition necessitates a specific cosmetic procedure, how the treatment will be used to alleviate the issue.