What to Know About PPE Equipment Being Payable Under FSAs, HSAs, and HRAs - Zupnick Associates

(By Saad Imran)

Disclaimer: The information provided in this article does not and is not intended to constitute legal advice. 

 

Since the CDC recommended wearing masks to control coronavirus spread, the American people have been buying them in huge numbers.  For face masks alone, the production numbers were expected to rise from 45 million units a month to 185 million units a month in 2020. The sales of PPE equipment, in general, have been estimated to increase by 24% every year until 2024.  

People have been spending a substantial part of their income to purchase PPE since.

PPE Costs

At the height of the pandemic, the cost of PPE increased by 1000% due to limited supply.  Healthcare providers are required to wear PPE, and there have been reports of dental offices and assisted living facilities charging their patients a COVID ‘fee’ to cover the expense of face masks and other equipment. 

These employees were not being provided reimbursement for COVID PPE by the CMS and private insurance companies. 

There was a lot of ambiguity regarding the coverage of PPE by group health insurance providers. But, a recent announcement by the IRS cleared that up and provided clarification that PPE is a qualified medical expense.  

The IRS announcement 2021-7

On 03/26/2021, The IRS made an announcement 2021-7 to clarify whether money spent on buying PPE is considered a medical expense or not. According to the IRS, under § 213(d) of the Internal Revenue Code, all payments made to purchase face masks, hand sanitizers, wipes, and other PPE are treated as a medical expense. 

This means: if a person has bought PPE for themselves, their spouse, or a dependent, 
who is not compensated by insurance, the money spent will be deductible under § 213(a). 
The only condition is that the total medical expenses of the person should exceed 7.5% 
of their adjusted gross income. 

The amounts spent on PPE can also be reimbursed under FSA, HRA, HSA, and Archer MSA. (Though, if someone has reimbursed those amounts under these health accounts, they’re not deductible under § 213.)

For group health plans, including FSA and HRA, which do not reimburse COVID PPE expenses, amendments may be made to reimburse amounts spent on COVID PPE after 01/01/2020. 

Reaction from Providers

This announcement was very well-received by the providers of health plans.

For example, Health-Ecommerce, the parent company of FSA and HSA marketplaces for eligible products, applauded the IRS for changing rules about PPE expenses.   The company said that they have been advocating this change for a year so that the 70 million Americans who use FSA and HSA can better protect themselves and their families against the pandemic. 

In October 2020, a bill was presented in the US House of Representatives regarding this change. However, it did not pass. 

Reaction from Americans

The reaction of American workers who have to deal with a broken healthcare system and rising unemployment rates are not as enthusiastic. The US healthcare system is built in such a way that its high costs benefit private insurers and healthcare providers, executives of pharmaceutical companies, and medical equipment manufacturers. However, employees who contribute as much as $1,242 annually to a group health plan do not get to enjoy the same benefits. 

Healthcare accounts such as HSA, HRA, and FSA make it a little easier for employees to manage their healthcare expenses and to cover any unexpected medical costs that might come up while also giving them tax benefits. Due to the pandemic, some employees are on the brink of losing that health coverage. 

Today

Presently, millions of employees across the US are using these health plans. A study by Metlife showed that 61% of employees consider healthcare benefits to be the reason for their satisfaction at work.  The inclusion of COVID-related PPE expenses in healthcare plan coverage will evidently bring down the quality of health benefits provided by the employer. This will increase the frustration of employees, who already deal with staggering medical costs. 

 

Not only that, but it will also have negative effects on the turnover rate of your company. This article mentions that employees might quit a company if they are not offered a good number of benefits. 

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