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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:
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.
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
Provide your team with a flexible healthcare budget
Jeremy Wolf, former professional athlete, is dedicated to enhancing healthcare access. As Customer Success and Broker Operations Lead at Thatch, Jeremy focuses on providing customers with everything they need to navigate the complex health insurance space.
Learn more about Thatch's teamThis article is for general educational purposes and is not legal advice. The opinions shared here belong to the author and are not official statements from Thatch. For legal and tax questions, please feel free to consult with a qualified professional.