When is wellness an HSA reimbursable medical expense?

It may not be tax season, but the tax-adjacent benefits questions HR managers so often receive from employees about their HSAs and FSAs will keep coming throughout the year.

Can I get reimbursed via my HSA for my counseling app? Can AirPods Pro 2 count as a hearing aid? What if I have a letter from my doctor recommending a gym membership?

The IRS issued a reminder in March of last year: General health and wellness expenses don't qualify as medical care under the tax code, despite what companies and other groups sometimes choose to advertise. But a one-time, government warning alone doesn't eliminate confusion. Employees need clear guidance, not flash-in-the-pan headlines.

Even with that alert, it's important to understand that "dual-purpose" expenses — wellness purchases that can qualify as medical under certain conditions — remain a gray area. That uncertainty leads to denied claims, underused benefits, and compliance risks for employers.

Read more:  Preparing for open enrollment: Advisers face significant headwinds in Q4

To assist their workforce, here are some of the key things HR and benefits professionals should know:

What is a dual-purpose expense?
One of the most frequently misunderstood categories of health spend for employees — and one of the most common for HR teams to get questions about — is what the IRS refers to as "dual-purpose" expenses. These are items or services that generally fall under wellness or lifestyle categories, but may qualify as medical expenses in specific situations.

Examples include fitness programs, dietary supplements, or massage therapy. On their own, they're not reimbursable via an HSA or FSA — but under the right conditions, they might be.

Here is what needs to happen for something to be considered dual-purpose:

• A licensed medical provider must recommend the expense to treat a diagnosed condition. This typically means a formal prescription or a written letter of medical necessity.
• The expense must meet the IRS definition of medical care, which excludes purchases based on general wellness goals or self-reported concerns, even if a doctor's note is involved.

For example, "My doctor says I should work on my back pain," isn't the same as a written recommendation for physical therapy. The former probably won't pass the standard for being dual-purpose, while the latter most likely will.
Read more:  How AI is helping employees understand their HSAs

HR teams can play a key role in clarifying these distinctions. While they don't approve expenses — that's the administrator's job — they can help employees navigate what is and isn't appropriate before submitting a claim. The best approach is often to go a bit Socratic and ask some questions.

Encourage employees to ask themselves:

1. Is this expense directly tied to a diagnosed medical condition? Not just a general goal like "be healthier" — but a condition that's been formally, medically identified.
2. Has a medical professional recommended or prescribed it? A verbal suggestion isn't enough; written documentation is usually required, and something an employee can request as they discuss their health with their physician.
3. Is it only necessary because of that condition? Rule of thumb: If the purchase would have been made anyway (like a gym membership for personal strength or weight-loss goals), it likely won't qualify.

While these questions won't resolve every case, they help employees better understand the boundaries.

What resources are available, and what should you provide?
Remind your team that most HSA, FSA, and HRA administrators offer eligibility lists or tools that can help — and those tools are getting better. As tech evolves, guidance on what qualifies will become more accessible (think AI-supported clarification and guidance vs. pages of text and hyperlinks). In the meantime, basic literacy and clear communication make a big difference in understanding and utilization.

As employees seek to become more financially secure, they're also trying to make the most of their benefits. Clear communication on what qualifies under health spending accounts reduces confusion, limits rejected claims and helps employees avoid underutilizing the accounts they already have.

Read more:  How the leader of DoorDash for Business makes feeding a workforce easy

What are the advantages of knowing more about this?
The stakes are higher than individual frustration. Misunderstandings around dual-purpose expenses can create compliance issues or even threaten a plan's tax-qualified status if ineligible reimbursements are processed. HR and benefits leaders don't need to memorize IRS rules — but helping employees understand the basics is a smart move.

And sometimes, it's the smaller moments that shape perceptions of the benefit. The employee who abandons a $200 claim after one denial. Or the one who avoids using their FSA altogether because they "don't want to deal with it." A little proactive guidance can change that.

With the right framing and support, HR teams can help employees navigate this space with more confidence. This is about encouraging better questions, reinforcing the value of existing benefits and creating a culture where employees feel comfortable using the tools available to them, while towing the line of what is required by regulation.