MMC Benefits Handbook
Qualified Medical Expenses
Who is responsible for determining whether the withdrawal is for a qualified medical expense?
You are responsible for determining whether the withdrawal is for a qualified medical expense. If you use the Prepaid MasterCard® to pay for expenses that are not qualified medical expenses, you will be subject to federal, state and local taxes as applicable, and in some cases a 20% penalty tax. You are required both to determine whether withdrawals are used for qualified medical purposes and to report on your annual tax return the amount withdrawn that is used for qualified medical expenses. Neither Marsh & McLennan Companies nor Trion will monitor this. Be sure to keep records (for example, receipts) so that you can prove to the IRS that the withdrawals are for qualified medical expenses that were not otherwise reimbursed. Please consult your personal tax advisor for specific advice regarding your personal circumstances.
What expenses qualify for withdrawals on a tax-free basis?
You can receive tax-free distributions from your Health Savings Account to pay for qualified medical expenses you incur after you establish the Health Savings Account. Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. For guidelines on qualified medical expenses under Internal Revenue Code (IRC) Section 213, see IRS Publication 502. However, some items listed in this publication are not reimbursable under the Health Savings Account (e.g. premiums, except for COBRA premiums, Medicare premiums, health premiums while you are receiving unemployment insurance, retiree medical plan premiums other than for Medigap insurance and certain long term care insurance premium amounts). For Health Savings Account specific requirements under IRC Section 223, see IRS Publication 969. IRS publications are available at www.irs.gov or by calling the IRS at +1 800 829 3676. You may also check with the Health Savings Account Administrator if you have questions about reimbursable expenses. The following are examples of qualified medical expenses that are covered by IRC Sections 213 and 223:
  • medical services provided by medical practitioners and that are not covered by another plan
  • charges for medically necessary services not covered by another plan, including but not limited to the following:
    • deductibles
    • out-of-pocket expenses
    • coinsurance
    • charges exceeding reasonable and customary amounts
    • charges exceeding plan limits
    • prescription drug charges
    • other non-covered charges
    • all medically necessary prescription drugs and certain other prescription drugs permitted by the IRS (e.g., contraceptives and pre-natal vitamins)
    • eye exams, glasses (frames and lenses), contact lenses and solutions for contact lenses, lubricant eye drops, eye patches and reading glasses
    • LASIK eye surgery
    • dental implants
    • dental treatment, routine dental care (cleaning, X-rays, fillings, etc.), and over-the-counter products such as denture adhesive, temporary filling and toothache relief (if accompanied by a Letter of Medical Necessity)
    • orthodontia (braces)
    • mouth guards
    • hearing exams, hearing aids
    • cost differences between semi-private and private hospital rooms
    • costs for special medical equipment installed in your home, or for home improvements for purposes of medical care, e.g., ramps, support bars, railings, etc. (if accompanied by Letter of Medical Necessity)
    • fees for special schools on the recommendation of a physician, including schools for the mentally impaired, physically disabled or individuals with severe learning disabilities
    • transportation (amounts paid for travel primarily for, and essential to, medical care)
    • personal use items if primarily used to prevent or alleviate a physical or mental defect or illness, e.g., Braille books, hearing aids
    • private nursing services rendered in your home or elsewhere
    • smoking cessation programs
    • weight loss programs (if you have a letter from your treating physician indicating medical necessity)
    • long-term care insurance premiums (Note: the tax-free reimbursement cannot exceed the annually adjusted "eligible long-term care premiums" in the Internal Revenue Code. This amount is based on age.)
    • COBRA premiums
    • Medicare premiums
    • health premiums while you are receiving unemployment insurance
    • retiree medical plan premiums other than for Medigap insurance.
  • periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals
  • routine prenatal and well-child care
  • flu shots (if not covered by the Marsh & McLennan Companies $1,500 Deductible Plan, $2,850 Deductible Plan, or any other plan)
  • vaccinations
  • child and adult immunizations
  • screenings for conditions such as:
    • cancer
    • heart and vascular diseases
    • infectious diseases
    • mental health conditions
    • substance abuse
    • metabolic, nutritional, and endocrine conditions
    • musculoskeletal disorders
    • obstetric and gynecological conditions
    • pediatric conditions
    • vision and hearing disorders
  • preventive over-the-counter expenses, such as:
    • home diagnostic tests or kits for blood pressure, cholesterol screening, diabetes (e.g., glucose monitor), colorectal, HIV
    • smoking-cessation relief, such as patches and gum
    • pre-natal vitamins
For guidelines on qualified medical expenses under Internal Revenue Code Section 213, see IRS Publication 502. However, some items listed in this publication are not reimbursable under the Health Savings Account (e.g. premiums, except COBRA premiums, Medicare premiums, health premiums while you are receiving unemployment insurance, retiree medical plan premiums other than for Medigap insurance and certain long term care insurance premium amounts). For Health Savings Account specific requirements under IRC Section 223, see IRS Publication 969. IRS publications are available at www.irs.gov or by calling the IRS at +1 800 829 3676. You may also check with the Health Savings Account Administrator if you have questions about reimbursable expenses.
As a Health Savings Account owner, you are responsible for verifying whether funds are appropriately used for qualified medical expenses and for maintaining appropriate records.
Please consult your tax advisor for specific advice regarding your personal circumstances.