Baby Formula: HSA Eligibility

In order to be considered a medical expense, baby formula must meet the criteria under IRS Rev. Rul. 55-261 in that it is (a) prescribed by a physician for alleviation of a specific illness, (b) are in addition to the patient's norma diet, and (c) are not part of the normal nutritional needs of the patient.

What is baby formula?

Commercial baby formula ingredients vary widely from brand to brand, but the composition of the formula is designed to replicate the nutritional content of a mother's breast milk one to three months postpartum. The Food and Drug Administration (FDA) has regulated that all commercial baby formula products must contain 29 essential ingredients, but the base of the formula can vary. The most common types of baby formula include via Mayo Clinic:

• Cow's Milk-Based - These formulas are chiefly designed to make it easier for babies to digest formula and closely resemble breast milk. However, because some babies could be allergic to the proteins found in cow's milk, other formula substitutes may be necessary.
• Soy Milk-Based - Soy-based formulas are typically embraced by parents who wish to avoid animal-based foods and exclude them from their child's diet.
• Protein Hydrolyzed Formula - These formulas are composed of proteins that have been partially broken down and fall into two categories: Partially Hydrolyzed and Extensively Hydrolyzed. Partially Hydrolyzed formulas have only a portion of the proteins broken down into short chains called peptides, while extensively hydrolyzed formulas have both peptides and free amino acids, the latter of which are classified as hypoallergenic.

Is baby formula FSA/HSA/HRA reimbursable?

The IRS views baby formula as a food that meets the normal nutritional requirements of a healthy child, and therefore outside the realm of consumer spending account reimbursement as it does not treat or alleviate a specific medical condition. Unfortunately, a mother's inability to breast feed will not qualify for reimbursement of baby formula. However, if the child has an allergy or a medical condition that calls for a specific type of formula, a benefits administrator may reimburse the difference in the cost of baby formula to treat a medical condition from regular baby formula, provided it meets the IRS criteria.

To ensure that account holders will be fully reimbursed for the price difference in formula, a Letter of Medical Necessity (LMN) from a physician may be necessary. This must outline a specific diagnosis about how a specific type of formula will be used to alleviate the issue.