Overview
Figuring out how prepaying for expenses works with your Health Spending Account (HSA) can be a head scratcher. Is the full expense reimbursable right away? Do I have to wait until I receive the service?
Typically, with an HSA, reimbursement can only happen once you’ve paid for and received the service.
That doesn't mean we can never reimburse a prepaid expense. It just means we'll need to take a closer look to make sure it meets eligibility requirements.
The details
What’s a prepayment?
A prepayment is when you pay for an expense in advance for a service that will be provided over a period of time.
Some examples include:
- Physiotherapy sessions
- Chiropractic treatments
- Orthodontic treatment
- Rehabilitation programs
- Subscription-style medical services
How HSAs treat prepayments
For an expense to be considered eligible for reimbursement from your HSA, it must follow CRA Medical Expense Tax Credit (METC) guidelines. These rules include a framework for eligibility related to when an expense is incurred.
In most cases, reimbursement is tied to when the service is received. However, when a prepayment is tied to a treatment plan with a clear financial commitment, it may be eligible at the time of payment.
Wait, so are they eligible or not?
Well, the answer is they might be. To make sure the expense meets the CRA eligibility requirements, here’s what we’re looking for:
- A defined treatment plan: This means a provider has outlined the type of service, the number of sessions and the timeline of those sessions
- A financial commitment: You’ve paid, or you’re obligated to pay, for the full course of treatment
- A reasonable treatment period: Services are expected to take place within the current benefit period or applicable carry forward window. Not sure how your Plan works? Read more in How funds are handled at renewal or reach out and ask our CX Team.
- Services that will actually be provided: The expectation is that the treatment will be provided, not just made available.
- It’s an eligible expense: The expense will need to be an eligible medical or dental expense.
When these conditions are met, the expense may be eligible for reimbursement.
When a prepayment isn’t eligible
A prepayment won’t be eligible if it’s not tied to defined care.
This means cases like:
- The payment is a deposit without a treatment plan
- Services aren’t clearly outlined
- Services won’t be provided within a reasonable time frame
What happens if I don't receive all of the services?
When we reimburse a prepaid expense it's based on the understanding that the services will be provided.
This means that you received the treatment or services that were agreed on and paid for. If you don't receive all of the services that were included in the prepaid amount, you'll need to let us know.
Any portion of the reimbursement that relates to services not received will no longer be eligible and may need to be repaid to your account. You'll have to let us know that the services were not fully provided and arrange for repayment.
You'll also be responsible for any tax implications if a previously reimbursed amount is later determined to be ineligible under applicable tax rules.
Anything else?
When it comes to prepayments, the structure of how you're paying isn't what determines eligibility.
What matters is the service itself. If the payment is tied to an eligible expense and there's a clear treatment plan in place, we can review it for eligibility.
If you're not sure about paying up front, it's always a good idea to check in with our team. We're happy to help you avoid surprises with reimbursement!