Paying For Drug Rehab With A Health Savings Account (HSA)

Medically reviewed by

Isaac Alexis, M.D., AAMA, AMP-BC

February 20, 2019

Are you wondering how to pay for drug rehab? If so you’re not alone. Unfortunately, within the United States there is a huge gap between need and treatment. One of the most often cited reasons are finances. It can be overwhelming to try and put all the pieces together to form a plan. That’s where we come in.

What Is An HSA?

The Mayo Clinic offers an easier way of understanding an HSA, by comparing it to a personal savings account where the money is used for health care. They also make an important distinction: “You — not your employer or insurance company — own and control the money in your HSA.” However, the money must be there for you to use it.

It is important to know that an HSA would not be of use to an individual who needs treatment right away. If you already have an HSA and are considering attending a drug or alcohol rehab program it could be a valuable resource as you create a treatment plan.

Your HSA will cover qualifying medical expenses for you, your spouse, any dependents who you claim on your tax return, and possibility others who you may have claimed as a dependent (more info on IRS site). Mayo explains: “You can use your HSA to pay deductible expenses, as well as copays and some other health care expenses that are determined by the individual HSA.”

Perhaps you don’t have an HSA but would like to start one, so that down the road you’ll have it should treatment needs arise. The following information will help you to determine if and how a health savings account could pay for treatment. The more information you have on financial options, the greater chance you can make you or a loved one’s treatment needs a reality.

How Can I Qualify For An HSA?

Not everyone qualifies for a Health Savings Account (HSA). In order to open an HSA you must have a high deductible health plan (HDHP). In short, these plans have a deductible which is higher than average insurance plans.

Also, to be eligible a person must not:

• Have any other health coverage, excluding that which is allowed under “other health coverage” (see IRS website).
• Be enrolled in Medicare.
• Be claimed as a dependent on anyone else’s tax return for the most recent tax year.
• Be covered under your spouse’s non-HDHP family coverage.

The IRS site published examples of these cost restrictions for HDHPs in 2017:

*This applies to only coverage within network, not out-of-network.

For more information on the specific criteria of an HSA, including more detailed explanations of a HDHP and “other health coverage,” visit the IRS’s informational page here.

How Do I Take Money Out Of An HSA?

If you need to pay for something that is not reimbursed by your HDHP or to seek reimbursement you need to contact your HSA trustee or administrator. Typically, they will send you a distribution in the form of a debit card or check which you may use for qualified medical expenses.

What Are The Benefits Of Having An HSA?

Financially speaking, there are many perks to having an HSA, as sourced from the IRS.

• You can claim your contributions as a tax deduction
• Employer contributions could be excluded from your gross income.
• Any interest or earnings your HSA makes will not be taxed.
• Funds (distributions) used to pay for qualified medical expenses will not be taxed.
• You can take your HSA with you to another job or if you stop working altogether.
• Funds roll over (transfer) to the next year.

Also, according to a Forbes article, “An HSA can be used to reimburse eligible medical expenses, even if they are incurred under a health insurance plan that wouldn’t qualify for an HSA.” In addition to these benefits, an HSA can be very helpful for some individuals or their families who need drug rehab treatment.

How Can An HSA Help Me Pay For Rehab?

If you have an existing health savings account it can be applied to substance abuse treatment. For example, Aetna, a major insurance carrier, lists alcoholism and drug addiction within their list of qualifying medical expenses, as explained below.

Treatment

The HSA covers treatment within a facility for a drug or alcohol addiction. In the case of inpatient drug rehab, this includes food and lodging. You may be surprised and encouraged to hear that they also include, “When recommended by a health care professional, fees and transportation costs to attend Alcoholics Anonymous (AA) meetings.”

Transportation

Other transportation costs are covered, such as car mileage or gasoline, car rental, plane fare, taxi, toll, and others; however, they do explain that “Long-distance travel cannot be undertaken for purely personal reasons (such as when equivalent treatment is available locally).” This may affect coverage for certain rehabs not within your immediate area. If any family members who are covered under the HSA need to visit a client due to recommendations for mental health concerns, this may also be covered.

Other

Funds also cover those related to medical care which is necessary for a drug overdose and prescription drugs which could be used within treatment. Certain use holistic methods of treatment, including acupuncture and massage, both of which qualify if “recommended by a healthcare professional.”

Contact your HSA trustee for the exact coverage description. If you need to pay for other out-of-pocket expenses which are not considered qualified medical expense, this amount will be included in your income and subject to taxes, including an additional 20 percent.

Forbes lists additional benefits, which we’ve tied into resources for drug treatment. Examples include:

• If you are 65 and older you can use your HSA to pay for Medicare Part B, Part D and Medicare Advantage premiums, coverage which may then help you with treatment needs.
• An HSA can become an “emergency fund.” You don’t have to get reimbursed immediately. You could wait years. While some might need the money right away for these things, holding off allows the HSA funds to grow and accrue interest. This ultimately offer you a larger safety net down the road. If a large, fairly unexpected expense like drug treatment arises, you could use these saved up reimbursements and get a distribution to pay for treatment.

Additionally, as explained by the IRS “Family members or any other person may also make contributions on behalf of an eligible individual.” This can allow loved ones to contribute to the funds which may be used for drug addiction treatment.

How Does An HSA Compare To Other Spending Accounts?

In addition to an HSA, there are other spending accounts. Each has specific criteria and stipulations to their formation and use, including if and how they may be used for substance abuse. A financial planner, various insurance companies, or a tax professional may be able to offer you more information on these options.

These accounts could affect your eligibility for having or making a contribution to an HSA. The IRS details that “An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally can’t make contributions to an HSA.” Certain arrangements may apply, which you can find on their site.

Are There Other Financial Options?

In addition to insurance coverage, paying out-of-pocket, and an HSA, a person may utilize one or several of other options to pay for treatment. These may include scholarships or grants, reduced or sliding fees offered directly by the treatment facility, medical credit cards, personal loans, and/or additional family assistance. We understand that all of this information can make an already overwhelming situation more complex, that’s why we’re standing by with helpful resources and compassionate support.

Create A Plan For Treatment

If you’re interested in finding a treatment program which you can use your health savings account on, we can help. At RehabCenter.net our staff is highly trained to understand the ins and outs of paying for treatment. Additionally, we can help you choose a treatment plan that best serves your needs. If you’d like to learn more about your treatment choices, HSA payment for rehab, or other financial options, contact us now.