What is considered a Qualified Medical Expense with ICHRA?

Tl;dr:

• Qualified medical expenses for ICHRA include a wide range of health-related costs, from doctor visits and dental procedures to medical equipment and certain insurance premiums.

• The IRS outlines these expenses in Publication 502, categorizing them into includible and non-includible expenses.

• Thatch is an easy way for companies to give their employees a budget for healthcare expenses. Employees can spend their budget using the Thatch Visa debit card or request reimbursement through the Thatch Dashboard.

What are Qualified Medical Expenses (QME)?

• Qualified Medical Expenses (QME) refer to the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and health-related equipment, supplies, and services.

• According to IRS Publication 502, includible QMEs range from general medical services (like doctor visits and surgeries) to specific treatments and devices (such as acupuncture, eyeglasses, or fertility enhancement).

• The list of includible expenses is extensive, including less obvious items like guide dogs for the visually impaired, legal fees related to medical treatment, transportation to medical appointments, and special education for children with disabilities​​.

How Qualified Medical Expenses work with Thatch

Thatch makes it easy for employees to use their healthcare budget on qualified medical expenses. Employees can text ThatchBot, our AI chatbot, at THATCH (842824) to ask whether a particular expense is covered and receive an instant answer.

To purchase qualified items, employees either:

1. Use a Thatch Visa debit card to purchase qualified items. When using the card, employees instantly receive a text message asking for a photo of the receipt to verify the expense. If the employee has enough funds in their balance to cover the purchase, the balance is deducted. Otherwise, any overage is withheld from the employee's upcoming paycheck, or debited from their personal bank account.

2. Use a personal payment method and request reimbursement from the Thatch Dashboard. Employees can visit the reimbursements page to submit an expense for reimbursement.

Thatch allows employers to decide whether qualified medical expenses can be paid for using the budget they provide.

Eligible Medical Expenses and ICHRA

ICHRA, a health reimbursement arrangement, allows for reimbursement of QMEs as defined by the IRS. Some examples include:

• Health insurance premiums

• Acne medications

• Baby rash ointments and creams

• Chiropractor or spinal manipulation and treatment services

• Contraceptives

• Digestive aids and antacids

• Doctor visits and standard medical consultations

• Dental treatment, including cleanings, fillings, extractions

• Eyeglasses, including prescription lenses and frames

• Hospital services like inpatient and outpatient care, medical bills for healthcare services, etc.

• Medical devices, like hearing aids or wheelchairs

• Over-the-counter medications like cold, cough and flu medicines, allergy medicines, acid controllers, pain relievers, etc.

• Prescription drugs and medications prescribed by a doctor

• Psychiatric care, Mental health treatment, and counseling

• Physical examinations or routine health check-ups

• Surgery or medical operations for health conditions

• Tampons, pads, and liners

Non-Deductible Medical Expenses

Certain expenses are not qualified for reimbursement under ICHRA. These include costs that are merely beneficial to general health or not directly related to medical care. Some examples of costs that are not covered:

• Baby sitting, childcare for a healthy baby

• Cosmetic surgery, unless medically necessary

• Dancing lessons, even if recommended for general health

• Diapers, unrelated to medical conditions

• Electrolysis or hair removal, cosmetic in nature

• Health club dues or gym memberships, unless given a letter of medical necessity from a doctor

• Health Savings Accounts, contributions to HSA accounts

• Household help like nannies, non-medical personal services

• Illegal operations and treatments or unauthorized medical procedures

• Maternity clothes, personal clothing items

• Medicines and drugs from other countries, non-FDA approved

• Nonprescription drugs and medicines, over-the-counter treatments

• Nutritional supplements, unless prescribed

• Personal use items, general wellness products like deodorant, chapstick, shampoo, or soap

• Swimming lessons, not medically prescribed

• Teeth whitening, cosmetic dental procedure

• Veterinary fees, pet medical expenses

• Weight-loss program, unless prescribed for a specific disease