The CARES Act expands HSA eligibility in 3 important ways
Even more tax savings are on the horizon. The CARES Act has expanded HSA-eligible expenses in a big way… three big ways, in fact.
On March 25, 2020, Congress passed the CARES (Coronavirus Aid, Relief and Economic Security) Act. It helps those whose income and financial security has been negatively impacted by actions meant to limit the spread of COVID-19 (novel coronavirus). It’s the largest economic stimulus package ever, setting it sets aside billions of dollars in small-business relief loans, as well as expansions of payments to those filing for unemployment.
It also contained some good and much-needed news for health savings account (HSA) holders—three new provisions that help those with HSA-qualifying HDHPs to get care no matter where they are and to pay for newly-eligible products to help get them through the coronavirus and beyond.
1. Menstrual care products are now HSA-eligible.
It’s perhaps more surprising that they weren’t already eligible, but better late than never! Making menstrual products an eligible medical expense is a very big deal that could mean billions of dollars in added tax savings for women and families.
What exactly counts as a menstrual care-based eligible expense? According to the text of the bill, this includes “tampon, pad, liner, cup, sponge, or similar product used by individuals with respect to menstruation.” Additionally, over-the-counter (OTC) medications related to menstrual health are also now eligible (more on that in number 3 below).
2. Telemedicine gets a two-year exception.
Most states and cities have instituted stay-at-home orders. This means that while the majority of American people are self-isolating, they’ve stopped visiting doctor’s offices, which might be treating symptomatic COVID-19 patients.
The CARES Act has allowed telemedicine visits to be an eligible expense pre-deductible.
What does this mean? Well, if your doctor offered telemedicine and charged it as a normal office visit, that was already covered under your HSA. But if you had a subscription-based service, like Teladoc, that’s technically considered “additional coverage” under HSA eligibility guidelines. This means that you were ineligible for an HSA. But Congress has put that issue on hold for the next two tax years (2020 and 2021). Now, you can get treated from afar no matter where the doctors are!
3. OTC medications are (once again) eligible expenses.
Prior to the Affordable Care Act becoming law, you could pay for things like ibuprofen and Benadryl with your HSA. But the ACA had to come up with some tax revenue to help pay for insurance subsidies. This meant the removal of OTC drugs from the HSA-eligible list. The CARES Act reinstated them, which means more millions or perhaps billions of dollars in tax savings for individuals and families alike.
All of these changes were retroactive to January 1, 2020. So get out those receipts. And if you haven’t signed up for an HSA yet, do it now!