FSA and HSA Eligible Health Devices: What Qualifies and Why

If you have a Flexible Spending Account (FSA) or Health Savings Account (HSA), you may be able to use pre-tax dollars to purchase health monitoring wearables — potentially saving 20–37% depending on your tax bracket. But the rules around what qualifies are nuanced, and the landscape has evolved significantly in recent years. Here's what you need to know.

FSA vs. HSA: A Quick Primer

Both FSAs and HSAs allow you to set aside pre-tax income for qualified medical expenses, but they work differently:

• FSA (Flexible Spending Account) — Employer-sponsored, use-it-or-lose-it annually (with limited rollover options). Available with most employer health plans.
• HSA (Health Savings Account) — Available only with High Deductible Health Plans (HDHPs). Funds roll over indefinitely, can be invested, and are triple-tax-advantaged (contributions, growth, and withdrawals for qualified expenses are all tax-free).

Both accounts use the same IRS definition of "qualified medical expenses" under Section 213(d) of the Internal Revenue Code, though FSA administrators may apply stricter interpretations.

The CARES Act Expansion (2020)

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 significantly expanded FSA/HSA eligibility, most notably making over-the-counter medications eligible without a prescription. It also clarified eligibility for certain health monitoring devices.

The key principle established: a product qualifies as an FSA/HSA-eligible medical expense if its primary purpose is the diagnosis, cure, mitigation, treatment, or prevention of disease, or if it affects a structure or function of the body.

Which Health Monitoring Devices Typically Qualify?

Generally Eligible

• Blood pressure monitors — Wrist-based or arm-cuff blood pressure monitors are widely accepted as FSA/HSA eligible when used for monitoring a diagnosed condition or managing cardiovascular health risk.
• Blood glucose monitors — Clearly eligible for diabetic management.
• Pulse oximeters — Eligible, particularly for monitoring respiratory conditions.
• ECG/EKG monitors — Eligible when used for cardiac monitoring.
• Sleep apnea devices — CPAP machines and related equipment are eligible.

Conditionally Eligible (May Require Letter of Medical Necessity)

• Wearable health monitors with blood pressure tracking — Devices that include clinically relevant monitoring functions (blood pressure, blood oxygen, ECG) may qualify, particularly when recommended by a physician for managing a specific condition.
• Sleep tracking devices — May qualify when used to monitor a diagnosed sleep disorder.
• HRV monitors — Eligibility is less established; a Letter of Medical Necessity from a physician strengthens the case.

Generally Not Eligible

• General fitness trackers (step counters, calorie trackers) used primarily for general wellness
• Smartwatches used primarily for communication and convenience features
• Gym memberships and fitness equipment (unless prescribed for a specific condition)

The Letter of Medical Necessity

A Letter of Medical Necessity (LMN) from a licensed healthcare provider can expand FSA/HSA eligibility for borderline items. The letter should specify:

1. The diagnosed medical condition being managed
2. Why the specific device is medically necessary for that condition
3. How the device will be used in treatment or monitoring
4. The prescribing physician's credentials and signature

With an LMN, devices like blood pressure monitoring wearables used to manage hypertension, or sleep trackers used to monitor sleep apnea, have a much stronger case for FSA/HSA eligibility.

How to Use FSA/HSA Funds for Health Wearables

The process varies by account administrator, but generally:

1. Check your plan's eligible expense list — FSA administrators maintain lists of pre-approved items. Some use the SIGIS (Special Interest Group for IIAS Standards) database.
2. Purchase with your FSA/HSA debit card — If the item is pre-approved, the card will work at point of sale.
3. Submit for reimbursement — For items not on the pre-approved list, purchase out of pocket and submit a reimbursement claim with your receipt and, if needed, an LMN.
4. Keep documentation — Retain receipts and any LMN for at least 3 years in case of IRS audit.

The Tax Savings Calculation

The financial benefit of FSA/HSA purchasing is substantial. If you're in the 22% federal tax bracket and your state has a 5% income tax, using pre-tax FSA/HSA funds saves you 27% on eligible purchases. On a $200 health monitor, that's $54 in tax savings — effectively reducing your cost to $146.

For HSA holders, the benefit compounds further: funds invested in the account grow tax-free, meaning the effective savings rate increases the longer funds remain invested before use.

Our Health Monitoring Devices and FSA/HSA Eligibility

Our Activity Monitor Watch includes blood pressure monitoring, blood oxygen tracking, and sleep stage analysis — functions that align with medically relevant monitoring. For customers managing hypertension, cardiovascular conditions, or sleep disorders, this device may qualify for FSA/HSA reimbursement, particularly with a Letter of Medical Necessity from your physician.

We recommend consulting with your FSA/HSA administrator and healthcare provider to confirm eligibility for your specific situation. FSA/HSA rules are administered at the plan level, and interpretations can vary.

Important Disclaimer

This article provides general educational information about FSA/HSA eligibility principles. It does not constitute tax or medical advice. FSA/HSA eligibility determinations are made by your plan administrator and the IRS. Consult a qualified tax professional or your plan administrator for guidance specific to your situation.