What Is The Health Care Spending Account?
The Health Care Spending Account (HCSA) is a negotiated employee benefit that helps state employees pay for health-related expenses with tax-free dollars. This includes medical, hospital, laboratory, prescription drug, dental, vision, and hearing expenses that are not reimbursed by your insurance, or other benefit plans.
Before enrolling in the HCSA program, you should carefully consider what your eligible expenses might be. Reviewing your expenses from previous years can help. Once you have estimated the amount of your expenses, you may then determine how much to contribute to your HCSA. Under federal law, any money that you put into your HCSA must be used for expenses incurred during the plan year in which it was contributed. For the 2021 plan year, the maximum annual contribution allowed is $2,750 and the minimum annual contribution is $100. The maximum contribution may be subject to change annually.
Who Is Eligible To Enroll?
1. Employees who work for New York State Executive Branch agencies, the State University of New York (SUNY), and the Legislature, and non-judicial employees of the Unified Court System are eligible if they meet the following:
- Are permanent employees or are expected to be on the payroll for the entire calendar year (employees who teach on a school year schedule and are paid on a 10-month basis are eligible if they meet the other criteria below)
- Are employed on an annual-salaried basis
- Receive regular, biweekly paychecks
- Work half-time or more on a regular schedule for a single agency
- Are eligible to enroll in the New York State Health Insurance Program
- Are represented by a negotiating unit that is eligible to participate or are designated Management/Confidential. Employees of Executive Branch agencies who are represented by one of the following unions are eligible to participate in the HCSA: CSEA, PEF, NYSCOPBA, Council 82, PBANYS, District Council 37, PBA, and NYSPIA. In addition, all negotiating units in the Unified Court System are eligible to participate.
Employees of the Roswell Park Cancer Institute, NYS Energy Research and Development Authority, Environmental Facilities Corporation and New York Liquidation Bureau are also allowed to participate if they meet the eligibility criteria listed above.
All judges and justices of the Unified Court System, paid elected officials, and paid members of the Legislature are eligible regardless of their work schedule.
2. UUP-represented employees employed by SUNY are eligible if they:
- Are permanent employees or are expected to be employed by New York State for the entire calendar year (employees who are hired on a semester basis are eligible if they meet the other criteria below) and
- Receive regular, biweekly paychecks and
- Are eligible to enroll in the New York State Health Insurance Program and
- Are academic employees who teach two or more courses per semester at a single university or
- Are full-time professional employees or
- Are part-time academic or professional employees who are hired by a single university at a specified annual rate ($15,930 or more between July 2, 2020 and July 1, 2021)
3. New employees must meet the eligibility criteria to participate in the HCSA. Your period of coverage will start on your 61st consecutive calendar day of employment. You will be able to submit claims for eligible health care expenses incurred on or after that date through December 31 of the plan year in which you are enrolled. Deductions will start with the first payroll date that occurs after you become eligible to submit claims.
Who Is Not Eligible To Enroll?
GSEU-represented, casual, seasonal, session, per diem, fee basis and hourly employees, as well as retirees, are not eligible to participate in the HCSA.
What You Need To Know Before Enrolling
To be reimbursed through the HCSA, expenses must be for health care received primarily for the prevention or treatment of a physical or mental defect or illness. Out-of-pocket expenses are generally eligible if they are not reimbursed by insurance. Regardless of whether the expenses are incurred by you or your eligible dependents, they must be incurred during the plan year or during your period of coverage if you enroll after the plan year begins. An expense is incurred when you or one of your dependents receives the health care service, not when you are billed, charged for, or pay for the service.
To be eligible for reimbursement, a health care expense must be:
- For you or an eligible dependent
- Permitted under the Internal Revenue Code
- Medically necessary
- Not reimbursed by your health insurance or any other benefit plan, nor will you seek reimbursement from such plans
Note: You can only be reimbursed for expenses that are incurred during your period of coverage, which means:
- If you enroll during the open enrollment period and remain on the state payroll for the entire year, your period of coverage is from January 1 to December 31.
- If you enroll during the plan year as a new employee, your period of coverage will begin after the completion of 60 consecutive calendar days of state service. Your coverage will end on December 31.
- If you enroll during the plan year as a result of a change in status, your period of coverage will begin when your change in status application is received, although it can't take effect before the date of your qualifying event. Your coverage will end on December 31.
- If you enroll during the open enrollment period and experience a mid-year change in status, you will have two separate periods of coverage from which expenses will be reimbursed.
When will I be reimbursed?
You can be reimbursed for your expenses as soon as you or your dependents receive medical services. In addition, once you sign up for the HCSA and decide how much you want to contribute, that total amount is available to you at any time during your period of coverage. It’s like a cash advance because you don’t have to wait for the cash to accumulate in your account before you can use it to pay for your eligible health care expenses. Your money is tax free and interest free!
Saving With The HCSA
We encourage you to use the online tax calculator to help you estimate the taxes you will save by enrolling in the HCSA. You will need your 2019 Federal and State tax returns to calculate your savings, which will depend on a number of factors such as your earned income, tax filing status, and the amount of your qualifying out-of-pocket health care expenses.
Whose Expenses Are Eligible For Reimbursement?
You may claim eligible expenses under the HCSA program for the following individuals:
- Your spouse
- Your qualifying child
- Your qualifying relative
An individual is a qualifying child if he or she:
- Is a U.S. citizen, national, or a resident of the U.S., Mexico, or Canada
- Has a specified family-type relationship to you
- Lives in your household for more than half of the tax year
- Is 18 years old or younger (23 years, if a full-time student) at the end of the tax year
- Has not provided more than one-half of his or her own support during the tax year (and receives more than one half of his or her support from you during the tax year if a full-time student age 19 through 23 at the end of the tax year)
An individual is a qualifying relative if he or she:
- Is a U.S. citizen, national, or a resident of the U.S., Mexico, or Canada
- Has a specified family-type relationship to you, is not someone else’s qualifying child, and receives more than one-half of his or her support from you during the tax year
- if no specified family-type relationship to you exists, is a member of and lives in your household (without violating local law) the entire tax year and receives more than one-half of his or her support from you during the tax year
Note: There is no age requirement for a qualifying child if he or she is physically or mentally incapable of self-care. An eligible child of divorced parents is treated as a dependent of both, so either or both parents may establish a HCSA to be reimbursed for the child’s health care expenses.
What Types Of Expenses Are Eligible?
Expenses are eligible for reimbursement if they are for medically necessary health care services. The expenses must be incurred during the plan year or during your period of coverage if you enroll after the plan year begins. Examples of eligible expenses under the HCSA are listed below.
Examples Of Medically Necessary ELIGIBLE Expenses
|Acupuncture||Contact lens solutions||Drugs (prescription only)3||Laboratory fees||Psychiatric care||Vaccinations|
|Alcoholism treatment||Copayments||Eye examinations||Laser eye surgery4||Periodontal fees||Vitamins1|
|Ambulance services||Crutches||Eyeglasses2||Menstrual care products||Physical therapy||Weight loss programs6|
|Artificial limbs2||Dental fees1||Guide dog and service dog expenses||Naturopathic healers||Smoking cessation programs||Wheelchairs|
|Breast pumps||Dentures||Hearing aids & exams||Nursing services1||Surgery1,4|
|Chiropractic care||Diagnostic tests||Holistic healers||Orthopedic shoes1||Telephone of the hearing-impaired|
|Dietary supplements1||Infertility treatments||Orthodontia||Transplant of organs|
|Contact lenses (corrective)||Drug addiction treatment||Insulin and diabetic supplies||Oxygen||Transportation5|
1 Some health care treatments or services, including those deemed cosmetic in nature, require written proof of medical necessity from your health care provider with your initial claim and for each subsequent plan year that you participate.
2 The effective date that expenses are incurred (for example, eyeglasses and prosthetic devices) is the day the item is available to be picked up, not the date ordered.
3 Not all drugs requiring a prescription are approved by the IRS as eligible for reimbursement. Prescription drugs that are used solely for cosmetic purposes are not eligible for reimbursement.
4 Unused funds designated for the HCSA cannot be refunded to you. Please verify with your health care provider (prior to enrolling for the upcoming plan year) that you are a suitable candidate for any surgical procedure before committing the money to your HCSA.
5 Must be primarily for, and essential to, medical care. Reimbursable expenses include 17 cents per mile in 2020 and 16 cents per mile in 2021 for automobile use, parking fees, tolls, subways, buses, trains and air travel.
6 Expenses incurred for weight loss programs may only be reimbursable if a physician prescribes the treatment as medically necessary to prevent, treat or alleviate a specific, diagnosed medical illness (such as hypertension, diabetes, or obesity).
Certain health care expenses are not eligible for reimbursement from your HCSA, some of which are listed below.
Examples Of INELIGIBLE Expenses
|Contact lens insurance contracts||Electrolysis||Health club memberships||Insurance premiums||Meal replacements2||Teeth whitening/bonding|
|Cosmetic procedures||Exercise equipment1||Herbal remedies||Items/services to improve general health||Medicines purchased outside the U.S.||Tennis and other sports lessons|
|Cosmetic surgery||Fitness classes1||Holistic medicines||Marriage counseling||Pilates||Yoga|
|Dance lessons||Hair transplants||Homeopathic remedies||Massage therapy1||Skating|
1 May be an eligible expense if prescribed by a doctor to treat a specific medical condition. Written proof of medical necessity is required.
2 Special foods may be an eligible expense if prescribed by a doctor to treat a specific illness or ailment and if the foods do not substitute for normal nutritional requirements. Food modified for special diets (e.g., gluten-free) may also be eligible, but only to the extent that the cost of the special food exceeds the cost of commonly available versions of the same product. Written proof of medical necessity is required.
Over-the-counter (OTC) drug expenses are reimbursable through the HCSA as long as the items are used to treat a medical condition or illness. Effective January 1, 2020, OTC drugs and medicines no longer require a written prescription from a doctor in order to be reimbursed. Certain OTC expenses such as vitamins and dietary supplements are not reimbursable unless they are recommended by a doctor to treat a medical condition. General purpose items such as toothpaste, moisturizers, and lip balm are not eligible expenses.
Eligible OTC Items
|Canker & cold sore treatments||
Diabetic monitors, test kits, strips & supplies
|Hearing aids & batteries||Monitors & test kits (OTC)||Propecia (for treatment of a medical condition)|
|Allergy & sinus medicine & products||Chest rubs||Diaper rash ointments & creams||Hemorrhoid treatments||Motion sickness & nausea medicines||Reading glasses (OTC)|
|Antacids||Cholesterol test kits & supplies||Ear drops & wax removal||Incontinence supplies||Occlusal guards to prevent teeth grinding||Retin-A (for non-cosmetic purposes)|
|Antibiotic ointment||Cold & flu medicines||Eye drops||Insulin, testing materials & supplies||Orthotics||Sleep aids|
|Anti-itch & insect bite products||Condoms||Eye-related equipment/ materials||Laxatives||Orthopedic & surgical supports||Teeth grinding prevention devices|
|Aspirin or other pain relievers||Contact lenses, cleaning solutions, etc.||Eyeglasses (OTC)||Lice treatments||OTC bandages & related items||Toothache & teething pain relievers|
|Asthma/respiratory medicines or treatments||Corn & callus remover||Feminine antifungal/anti-itch treatments||Medical equipment (for treatment of a medical condition) & repairs||OTC products for dental, oral, & teething pain||
|Bandages & related items (OTC)||Cough drops & sore throat lozenges||Fertility monitors (OTC)||Medical monitoring & testing devices||Ovulation monitor (OTC)||Walking aids (canes, walkers, crutches & related supplies)|
|Birth control (OTC)||Cough syrup||First aid kits (OTC)||Medical supplies (for treatment of a medical condition)||Pain relievers||Wart removal treatments|
|Blood pressure monitors||Crutches, canes, walkers or like equipment (purchase or rental)||Gastrointestinal medications||Menstrual care products||Pregnancy tests (OTC)||
Wound care (OTC)
Ineligible OTC Items
|Herbal medicines||Holistic medicines||Homeopathic remedies||Items to improve general health|
|Moisturizers||Lip balm||Toothpaste and toothbrushes|
Eligible OTC Items That Require a Letter of Medical Necessity
Mileage and Travel Reimbursement
Mileage and other transportation expenses are reimbursable if the transportation is primarily for, and essential to, receiving medical care.
Mileage is reimbursable as long as a receipt, statement or bill validating your doctor visit is submitted with your claim requesting mileage reimbursement. The standard mileage rate for use of an automobile to obtain medically necessary health care (as described in IRS Code Section 213) is $0.17 for travel that takes place from 1/1/20 through 12/31/20 and $0.16 for travel that takes place between 1/1/21 through 12/31/21. To submit your claim for mileage to a health care appointment or pharmacy, calculate the mileage on the actual bill/receipt detailing the following: roundtrip mileage multiplied by $0.16 for 2021. Make sure to include the name of the health care provider or pharmacy on the claim form.
In addition to mileage reimbursement, you may seek reimbursement for parking and toll fees incurred as a result of travel for your medical appointment. Your claim should include a receipt for the toll and/or parking fee in addition to a bill or receipt from your health care provider validating your doctor’s visit.
To be reimbursed for subway or bus expenses incurred for medical treatment, visit the MTA web site at http://www.mta.info/metrocard/mcgtreng.htm#top and print the page that indicates that the fare for a subway or local bus ride is $2.75. Attach the printout to your claim form, along with a bill or receipt from your health care provider validating your doctor’s visit, in order to have your claim approved.
You may also be reimbursed for transportation expenses (including airline fare) to another city if the trip is primarily for, and essential to, receiving medically necessary health care services. You also may be able to include the cost of lodging not provided in a hospital or similar institution. The amount of lodging cannot be more than $50 per night for each person. Lodging is included for a person for whom transportation expenses are a medical expense because that person is traveling with the dependent receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Meals are not included.
You cannot include a trip or vacation taken merely for a change in environment, improvement of morale, or a general improvement of health, even if you make a trip on the advice of a doctor, as a medical expense.
Changes In Status
You may be eligible to enroll after open enrollment has ended or during the plan year if you experience a change in status (CIS) event. You must enroll within 60 days of the change event.
Once enrolled in the HCSA, you may not change your election amount. Your pre-tax deductions will continue throughout the plan year. However, there are certain circumstances where a change in your annual election may be permitted, as long as the change is consistent with the change in your family situation. For example, if you become married during the plan year, you may increase the amount of your contribution, and if you lose a dependent during the plan year, you may reduce the amount of your contribution. However, you are not allowed to reduce your election amount to $0 if you have a change in status. Certain events, such as marriage, the birth of a child, or returning to work from an unpaid leave of absence will allow you to enroll during the year. Below is a list of eligible change in status events:
- Change in legal marital status such as marriage, death of spouse, divorce, legal separation, or annulment
- Change in number of eligible dependents due to birth, death, adoption, or placement for adoption
- The taking of, or return from, an unpaid leave of absence for the employee
- Beginning or end of employment for the employee
- Gain or loss of spouse’s or eligible dependent’s eligibility for health insurance coverage due to a change in employment
- Gain or loss of your dependent’s eligibility for health insurance by attaining a specified age, due to a change in student or marital status, or because of other allowable circumstances
If you have a change in status, call customer service or visit this website to complete a change in status application. Your change in status application must be submitted within 60 calendar days of the qualifying event, but as soon as possible to prevent unwanted, non-refundable deductions. You will also need to include documentation to support the change request, such as a copy of a marriage license, divorce decree, birth certificate, adoption decree, or death certificate.
The effective date of your new period of coverage and your new election amount will be the date your application is submitted to the FSA administrator or the date of your qualifying event, whichever is later, unless you are a new employee. If you enroll during the year as a new employee, your period of coverage will begin on your 61st consecutive calendar day of employment. In addition, if you are enrolled in the HCSA when the plan year begins on January 1 and you submit a change in status request during the plan year, you will have two separate periods of coverage from which expenses must be incurred and will be reimbursed.
Change in status applications will be accepted during the plan year for events that occur on or before November 1, 2021. Applications received after November 1 won’t be accepted because they can’t be processed in time for the last payroll deduction of the year.
What happens if I leave the payroll during the plan year?
If you leave the payroll due to termination of employment, leave without pay (including leave under the Family and Medical Leave Act), or any other reason, and stop contributing to your account, your HCSA coverage will be terminated. You will still be able to submit claims for expenses that occur on or before your last paycheck deduction, but any health care expenses that occur after your contributions stop will not be reimbursed. However, under certain circumstances you may still continue participating in the HCSA after you leave the payroll:
- If you are eligible to elect COBRA coverage, you can make after-tax payments directly to the FSA administrator, although under the direct pay option, you won’t save money on your taxes. If you leave the payroll during the plan year (either temporarily or permanently) and want to continue your coverage, the FSA administrator will send you a COBRA notice that you must sign and return by the specified deadline.
- Before you retire, terminate employment, or take a planned leave of absence (such as under the Family and Medical Leave Act) you can pre-pay your election by increasing the amount of your biweekly deductions to compensate for the deductions you expect to miss once you leave the payroll. If you choose this option, you must contact the plan via email at [email protected] as soon as possible to arrange for your deductions to be adjusted before you receive your last paycheck.
- If you return to the payroll during the same plan year, you can re-enroll if you submit a change in status application within 60 days of your return to the payroll. Change in status applications will be accepted during the plan year until November 1, 2021.
- If you leave and then return to the payroll, you may re-enroll, but only for the same election amount that you had at the time you left the payroll. However, you will have two separate periods of coverage from which expenses can be incurred and reimbursed.
Remember, even if you re-enroll in the HCSA after you return to the payroll, you will not be reimbursed for health care expenses incurred during the time period when you were not contributing to your account.
What To Do At Tax Time
When you receive your W-2 for the 2021 tax year, the salary reported in Box 1 will already be reduced to reflect your 2021 plan year HCSA contributions. You are not required to file any tax forms to report your HCSA contributions.
Does the HCSA replace my medical plan?
No. This program offers you a way to pay for eligible out-of-pocket health care expenses with pre-tax money. You cannot submit expenses for which you have received or will seek reimbursement from your health care plan or other source. You should first submit your claims to your health insurance plan. Once you know how much of your cost is covered, then submit any remaining out-of-pocket eligible expenses to the HCSA for reimbursement.
Am I required to participate in the New York State Health Insurance Program (NYSHIP) in order to enroll in the HCSA?
No. If you have coverage elsewhere, you may still enroll in the HCSA as long as you meet the eligibility criteria.
If my spouse or I have health insurance coverage elsewhere, can I still enroll in or use the HCSA to pay for my family’s expenses?
Yes. You can participate in the HCSA even if you are not enrolled in NYSHIP.
If my spouse and I are state employees, can we both enroll in the HCSA?
Yes. Any eligible state employee may enroll in the HCSA, up to the maximum contribution per individual for the tax year. However, if both spouses enroll, each health care expense can only be reimbursed once.
Whose expenses are eligible for reimbursement under the HCSA program?
The HCSA may be used to reimburse health care expenses for you, your spouse, and anyone who is defined as a qualifying child or qualifying relative by the Internal Revenue Code.
Are my domestic partner’s health care expenses eligible for reimbursement from my HCSA?
According to the IRS, health care expenses for a domestic partner cannot be reimbursed through the HCSA unless the domestic partner qualifies as a dependent under the Internal Revenue Code.
Are expenses that are reimbursed by the HCSA eligible to be deducted on my tax return as a medical expense?
No, because you have already received reimbursement with tax-free dollars. Only expenses that are not reimbursed through an insurance plan, some other source, or the HCSA may be deducted on your income tax return.
What happens if my medical expenses change during the plan year? Can I increase or decrease my HCSA contributions?
No. According to IRS rules, a change in medical expenses is not a qualifying event that would allow you to change the amount of your HCSA annual election. So, if you incur more medical expenses during the plan year you cannot increase your HCSA contributions. If your medical expenses are less than you had planned, you cannot reduce your HCSA contributions.
If I have an eligible change in status, can I increase or decrease my HCSA amount?
Yes, however your change must be consistent with the event. The IRS requires that the FSA administrator treat the periods prior to and subsequent to the change as two separate periods of coverage for reimbursement purposes.
If I was not eligible to enroll in the HCSA during the open enrollment period, but gain eligibility during the plan year, can I enroll mid-year?
No. A change in eligibility is not a change in status event that would allow you to enroll in the HCSA during the plan year.
What happens if I retire, terminate employment with the State, or take an unpaid leave of absence during the year?
If you retire, terminate employment, or take an unpaid leave of absence during the plan year, your coverage will be terminated once you leave the payroll and stop contributing to your account, unless you plan ahead during open enrollment. You can contribute your full annual election before you leave the payroll, which will enable you to use your account for expenses incurred after you leave.
When you apply for enrollment, make sure to indicate the number of paychecks you expect to receive before you leave the payroll. If you are unable to plan ahead, you may still continue to participate in the HCSA by making after-tax COBRA payments directly to the FSA administrator, or by arranging to pre-pay the balance of your annual election before you leave the payroll. Email the plan at [email protected] if you wish to arrange pre-payments.
I am an adjunct professor at a state university, and don’t expect to receive paychecks during the summer months. Will that affect my participation in the HCSA?
Yes. If you are an adjunct employee and leave the payroll at the end of the spring semester, your coverage will be terminated once you stop contributing to your account. However, if you plan ahead during the open enrollment period and select the option of contributing your full annual election by the end of the spring semester, your participation will continue uninterrupted after you leave the payroll.
What happens to the money in my account if I separate from state service during the plan year? Can I use it after I leave?
If you retire, leave state employment, go on leave without pay, or otherwise stop contributing to your account, the money in your account can only be used for services that occurred before you left the payroll. However, if you continue to contribute to the HCSA after you leave the payroll by making after-tax payments directly to the FSA administrator, or if you pre-pay the balance of your annual election before leaving the payroll, you will be able to submit claims for services that occur after you leave your state job.
Can I request reimbursement from the HCSA for services I receive before the plan year begins if I am not billed until after the plan year starts?
No. According to IRS guidelines, a qualified expense is “incurred” at the time the service is provided, not when you are billed (or charged) or actually pay for the service. Therefore, reimbursements made during a plan year are only for eligible medical services received during that same plan year.
Can health care services that require upfront payment to the provider be reimbursed from the HCSA in a single plan year, even if the health care is delivered over several plan years?
No. IRS regulations do not allow medical expenses to be reimbursed through the HCSA until they have been incurred. Expenses are not incurred until treatment is provided to the participant, regardless of when the participant pays the provider.
How do I know if my child’s orthodontia will be reimbursed? How are orthodontic expenses reimbursed if I pay my provider on a monthly payment plan?
Orthodontic expenses are a reimbursable expense through the HCSA. At the beginning of the plan year in which you first request reimbursement for these expenses, you must submit a copy of the service contract between you and the orthodontist describing the payment arrangement/schedule.
Orthodontia costs that are paid on a monthly payment plan will be reimbursed after each monthly payment is due. However, if you pre-pay the entire cost of orthodontia treatment up front, you will only be reimbursed in a particular plan year for the value of the services that will be provided during that plan year. You must submit a claim for the pro-rated monthly amount on or after the beginning of each month of service, since you will not be reimbursed automatically.
Are dental implants reimbursable?
Yes. Dental implants are reimbursable as long as they are not a cosmetic treatment.
Will the HCSA reimburse the cost of my prescription drug, even if my insurance plan won’t pay for part of it?
Any prescription drug can be reimbursed as long as it is used to treat a medical condition. Prescription drugs that are primarily used for cosmetic purposes can’t be reimbursed.
Can over-the-counter drugs, herbal medicines, and homeopathic remedies be reimbursed if my doctor or medical provider prescribes them to treat my medical condition?
OTC drugs, medicines, and biologicals are eligible for reimbursement under the HCSA. Dietary supplements and vitamins are reimbursable if recommended by a doctor to treat a medical condition, and if your claim for the expense is submitted with a letter of medical need written by your doctor. However, herbal medicines and homeopathic remedies are not reimbursable under the HCSA.
Can travel expenses related to my medical care be reimbursed through my HCSA?
Yes. The IRS permits you to be reimbursed for amounts paid for transportation primarily for, and essential to, medical care. You can receive reimbursement for car mileage (17 cents per mile in 2020 and 16 cents per mile in 2021), parking fees, tolls, subways, buses, trains, air travel, and lodging if the costs are incurred primarily to receive medical care.
Will the plan pay for upgrades to my prescription glasses?
Yes. You can be reimbursed for the cost of upgrades or add-ons (such as scratch-resistant coating) to your prescription lenses and frames. There is no limit on dollar amounts of the upgrades or add-ons. Non-prescription glasses, warranties, and sunglasses are not reimbursable.