Using FSAs and HSAs for Stem Cell Banking Costs

Using FSAs and HSAs for Stem Cell Banking Costs

Yes, you can use Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) to help cover stem cell banking costs, but only under specific conditions. Here's what you need to know:

• Eligible Expenses: The IRS allows FSA and HSA funds to cover stem cell banking costs only if it's for treating an existing or imminent medical condition, not as a precautionary measure.
• Tax Savings: Using pre-tax dollars from these accounts can lower your out-of-pocket costs by your tax rate. For example, a family in the 22% tax bracket could save $220–$440 on initial costs.
• Documentation: A Letter of Medical Necessity (LMN) from your doctor is required to prove the expense is medically necessary.

Quick Overview of FSAs vs. HSAs

Why It Matters

Stem cell banking can cost $1,000–$2,000 upfront, with $150–$250 annual storage fees (in some cases). Using an FSA or HSA can make these costs more manageable while providing a financial safety net for medical needs. Pricing is subject to change, for the most up-to-date prices visit https://production.americordblood.com/pricing

To qualify, ensure you have proper documentation and check with your account administrator for specific requirements. This can help you plan better and save money while securing a critical health resource for your family.

Eligibility of Stem Cell Banking Costs for FSAs and HSAs

Figuring out if stem cell banking expenses qualify for reimbursement through an FSA or HSA hinges on understanding IRS rules. The key difference lies in whether the expense is deemed a medical necessity or simply a general health precaution. This distinction determines whether these costs can be covered using tax-advantaged funds. To find out if your expenses meet the IRS's strict definition of a qualified medical expense, you’ll need to review their guidelines carefully.

IRS Guidelines for Qualified Medical Expenses

The IRS outlines qualified medical expenses in Section 213 of the Internal Revenue Code. These are costs incurred to diagnose, treat, or prevent disease. To qualify, the expense must primarily address a specific medical condition or prevent a disability or illness. On the other hand, expenses aimed at maintaining general health are not eligible.

For stem cell banking, the expense must directly relate to the diagnosis, cure, mitigation, treatment, or prevention of a specific disease. Banking solely for potential future use does not meet the criteria. To qualify, the storage must address a current or imminent medical condition, such as a diagnosed illness like leukemia, sickle cell anemia, or lymphoma, or a genetic predisposition to such conditions.

Importantly, only temporary storage tied to an existing or imminent condition qualifies. This means the storage period must be limited to what’s needed to treat the specific condition - not for indefinite future use.

To establish eligibility, you’ll need a detailed Letter of Medical Necessity (LMN).

The Role of a Letter of Medical Necessity (LMN)

An LMN is a critical document that connects your medical situation to IRS guidelines, making it possible to use FSA or HSA funds for stem cell banking. It’s essentially a formal explanation from your healthcare provider, confirming that the expense is medically necessary.

A letter of medical necessity explains why your healthcare provider is recommending a specific treatment or product. This document verifies that the expense is for the diagnosis, treatment, or prevention of a disease or medical condition, rather than for general health purposes. - Tom Taulli, EA

This letter is especially important for procedures or products that aren’t explicitly listed as qualified medical expenses by the IRS or are excluded from standard health insurance coverage. Since stem cell banking often falls into this gray area, most FSA and HSA administrators require an LMN before approving reimbursement.

Who can write the LMN? The healthcare provider writing the letter must be directly involved in your care. This isn’t something any doctor can provide - it must come from the physician treating the patient and recommending stem cell banking based on their medical knowledge of your condition.

A comprehensive LMN should include the following:

• The patient’s name and relevant medical history
• The specific diagnosis or condition being addressed
• A clear explanation of why stem cell banking is medically necessary
• The expected duration of treatment or storage required
• The date the letter was written
• The healthcare provider’s relationship to the patient, along with their contact information and signature

Before moving forward, check with your FSA or HSA provider to confirm their specific requirements. Some administrators may need additional documentation or have unique approval processes. Ensuring your LMN covers all necessary details can help avoid delays and streamline the reimbursement process.

Medical scenarios most likely to qualify for reimbursement include cases where stem cells are used to regenerate a patient’s blood supply with healthy cells or to aid recovery from intensive treatments like chemotherapy or radiation. These examples align with the IRS’s focus on treating or preventing specific medical conditions, rather than general precautionary measures.

Using FSAs and HSAs for Americord Services

If you're considering using your FSA or HSA funds for stem cell banking, it's essential to follow the IRS eligibility guidelines and secure a Letter of Medical Necessity. Once eligibility is confirmed, you can work with both your account administrator and Americord's support team to streamline the reimbursement process. Here's a clear guide to help you navigate the steps.

Step-by-Step Process for Reimbursement

Reimbursing Americord Registry services through an FSA or HSA involves the following steps:

• Reach out to your plan administrator first: Before making any payments, contact your FSA or HSA administrator to confirm eligibility and learn about your plan's specific requirements. Each plan may have different documentation or approval processes.
• Coordinate with Americord Registry: Inform Americord that you plan to use FSA or HSA funds. The team can provide the necessary paperwork, detailed cost breakdowns, and guidance to simplify the claims process.
• Submit your claim with all required receipts: Ensure your receipts include:
  • The patient’s name
  • The provider’s name (Americord Registry)
  • The date of service
  • The type of service (e.g., cord blood banking)
  • The cost of the service
• Keep comprehensive records: Attach your Letter of Medical Necessity to your reimbursement request. This letter should clearly state that the cord blood banking is intended to treat an existing or likely medical condition.

Reimbursement timelines can vary depending on your plan administrator. Having complete documentation can help speed up the process. Some plans may require pre-approval before you pay for services, while others allow you to pay upfront and file for reimbursement later. To avoid delays, confirm your plan's specific process ahead of time.

Americord Stem Cell Banking Services

Now that you know how to handle reimbursement, let’s explore the services offered by Americord Registry that align with these guidelines.

Americord specializes in cord blood, cord tissue, placental tissue, and exosome preservation. These services are designed to support regenerative medicine and provide potential treatment options for various medical conditions. The company is known for its focus on innovation, transparency, and personalized customer care.

• Cord blood banking: This service preserves stem cells from umbilical cord blood collected at birth. These stem cells are effective in treating conditions like blood disorders, immune deficiencies, and certain cancers. Americord uses CryoMaxx™ Processing technology and stores samples in 5-compartment vials for flexibility in future use.

• Cord tissue banking: This option saves mesenchymal stem cells from the umbilical cord tissue. These cells hold potential for regenerative treatments involving injuries to bones, cartilage, and connective tissues.

• Placental tissue banking: By preserving stem cells and growth factors from the placenta, this service broadens the possibilities for future regenerative therapies.

Americord is AABB accredited and adheres to strict quality standards during collection, processing, and storage. Their transparent pricing helps families understand the costs upfront, making it easier to prepare for FSA or HSA reimbursement.

When using FSA or HSA funds, the services you choose must align with your Letter of Medical Necessity and the medical condition being addressed. Americord's customer service team can help you identify which services are eligible and assist with gathering the required documentation to ensure a smooth claims process.

Comparing FSA and HSA Use for Stem Cell Banking

FSAs and HSAs both offer tax advantages for covering stem cell banking expenses, but they work in distinct ways. Deciding between them depends on your healthcare needs and financial goals.

FSAs vs. HSAs: Key Differences and Benefits

Here’s a quick breakdown of how FSAs and HSAs compare, so you can evaluate which might work best for you:

If you’re considering an HSA, you’ll need to have a high-deductible health plan (HDHP). For 2025, contribution limits are set at $4,300 for individuals and $8,550 for families, with an additional $1,000 catch-up contribution allowed. On the other hand, FSAs - offered through employer-sponsored plans - have a lower contribution cap of $3,300 for both individuals and families.

One major difference lies in fund rollover. HSA funds roll over year after year without expiration, making them a great option for long-term planning. FSAs, however, typically follow a "use-it-or-lose-it" rule. Some employers may allow up to $660 to carry over into 2025, but this still requires careful timing to avoid losing unused funds.

Ownership and portability also set these accounts apart. HSAs are individually owned, meaning the account stays with you even if you change jobs. In contrast, FSAs are tied to your employer, and any unused funds are usually forfeited if you leave your job.

Another advantage of HSAs is the ability to invest your funds, allowing them to grow tax-free through mutual funds or other investment options. FSA funds, however, cannot be invested or earn interest.

Access to funds also differs. With an FSA, your full annual contribution is available at the start of the plan year, which can be helpful for immediate expenses. HSAs, however, only let you use the amount you’ve contributed so far, so you may need to build up your balance for larger costs.

Both accounts require documentation to ensure that expenses qualify.

For families looking into services like those offered by Americord Registry, HSAs tend to provide more flexibility for long-term planning, especially if you’re eligible for a high-deductible health plan. FSAs, however, can be a practical choice if you need immediate access to your full annual contribution and plan to use the funds within the same plan year. Carefully consider these differences alongside your financial and healthcare needs to decide which account aligns best with your approach to managing stem cell banking costs.

Tips for Maximizing FSAs and HSAs

Make the most of your FSA or HSA by understanding eligibility rules and keeping your records well-organized.

Verification and Recordkeeping

Before using your FSA or HSA for stem cell banking services, check with your plan administrator to confirm eligibility. Each plan has its own set of rules, so what’s covered under one account might not be covered under another. Reach out directly to your administrator to clarify whether cord blood banking expenses qualify and what documentation they’ll need.

Ensure your Letter of Medical Necessity (LMN) meets reimbursement requirements annually. This letter is crucial - it provides the medical justification often required for reimbursement. It should clearly state that stem cell banking is necessary for your specific circumstances.

Keep detailed records to avoid issues during FSA or HSA audits. Save all receipts, invoices, and LMN documentation in a secure digital format for at least seven years.

Tracking expenses is important because HSAs are tax-advantaged accounts and individual account holders are responsible for proving eligibility, in the event they are ever audited by the IRS. - Itamar Romanini, Vice President and General Manager, HSA Store

Hold onto your HSA purchase records for at least seven years. The IRS may need these documents during an audit. Using digital tools or apps can simplify tracking and organizing your records. A simple spreadsheet or dedicated app can help you monitor your spending, contributions, and remaining balances, ensuring you stay within limits and don’t lose unused FSA funds at the end of the year.

Once your records are in order, explore tax deduction opportunities to save even more.

Tax Deduction Considerations

Tax deductions can further reduce costs for eligible stem cell banking expenses. IRS Section 213 outlines which medical expenses qualify for deductions, so reviewing IRS Publication 502 is a good place to start.

Work with a tax professional to navigate the complexities of these deductions. A tax advisor can help you determine whether your specific expenses qualify and guide you on how to document them properly on your tax return.

If you have an HSA, you might be able to claim a tax deduction for medical expenses that exceed 7.5% of your adjusted gross income, even if you’ve already used HSA funds for other healthcare costs. This dual advantage makes HSAs particularly beneficial for families with high medical expenses.

Request a detailed cost breakdown from providers like Americord Registry to streamline both reimbursement and tax filing. Having clear documentation from your stem cell banking provider can make the process much easier.

Lastly, if you’re using an FSA, carefully review your plan documents. Some plans include exclusions or specific requirements for stem cell banking expenses. Knowing these details upfront helps you avoid surprises when you submit a reimbursement request.

Conclusion: Planning for Your Child's Future Health

Using FSAs and HSAs to cover Americord's stem cell banking expenses is a smart way to reduce costs while safeguarding your child’s health. By setting aside pre-tax dollars for qualified medical expenses like stem cell banking, families can make this potentially life-saving option more affordable. It’s a strategy that requires careful planning, proper documentation, and a clear understanding of reimbursement rules.

Cord blood stem cells have already been used in over 50,000 transplants worldwide and are known to treat more than 80 conditions, including leukemia and other serious blood disorders. Leveraging FSA or HSA funds for this purpose can ease the financial burden of such an important investment.

To maximize these savings, steps like obtaining a Letter of Medical Necessity, keeping thorough records, and consulting a tax professional can help you get the most out of your FSA or HSA benefits. Once preserved, cord blood can remain viable for up to 20 years, ensuring these stem cells are available if your family ever needs them.

Banking stem cells early means preserving the strongest and most abundant cells, which naturally decrease in number as we age. These stored cells offer a significant advantage: they eliminate the risk of rejection often associated with donor cells and may even benefit immediate family members.

Americord Registry’s tailored services, combined with the tax advantages of FSAs and HSAs, make stem cell banking a practical and accessible choice for families. Whether you’re preserving cord blood, cord tissue, placental tissue, or exosomes, having the right financial tools in place ensures this critical health resource is within reach.

As the stem cell market grows by 16% annually, more families are recognizing the promise of regenerative medicine. By pairing the tax benefits of FSAs and HSAs with Americord Registry’s advanced preservation options, you’re not just saving money - you’re making a forward-thinking investment in your family’s health and future peace of mind.

FAQs

References

1. Tom Taulli, EA, Forbes Health. "What Is A Letter Of Medical Necessity (LMN)?"
2. Itamar Romanini, Vice President and General Manager, HSA Store. "Keeping HSA Records"