In 2017, an estimated 20.7 million people needed treatment for a substance use disorder but only 4 million people received treatment (about 19% of those who needed it).1 One of the most common reasons people don’t receive treatment is a lack of financial ability. Fortunately, several different options can relieve the burden of paying for drug rehab and help you pay for treatment if you need it. For some people, a health savings account (HSA) may be an excellent option.
What is an HSA?
An HSA (health savings account) is a type of personal savings account that is used to pay for qualified health care expenses for yourself, your spouse, and your eligible dependents.2 Any money you deposit into your HSA is owned by you (not your employer or your insurance company) and the funds you spend are federal income tax-free.
The IRS sets a limit on how much you may deposit into your HSA annually, but your employer can also contribute to your HSA, as long as both contributions do not exceed the annual limit. Unlike a flexible spending account, all of the unused funds that are leftover in your HSA at the and of the year may be rolled over into the next. Additionally, if you open an employer-sponsored HSA and you retire or quit, that money is still yours and you can take it with you.
Some common examples of HSA-qualified medical expenses include (but are not limited to):
- Drug addiction treatment
- Prescription drugs
- Psychologist counseling/therapy
- Hospital services
- Laboratory fees
- Chiropractic services
- Dental treatment
- Eyeglasses, contact lenses, and eye exams3
If you use any of your HSA funds to pay for an expense that the IRS deems as an unqualified medical expense, you must report the amount as taxable income and you may also have to pay an additional tax penalty.
If you are interested in setting up an HSA, it’s important to note that there are certain eligibility requirements. To set up an HSA, you must:
- Be under the age of 65
- Carry a high-deductible health insurance plan and not be covered by any other health insurance plan
- You or your spouse must not have a flexible spending account
- Have a spouse who is also enrolled in a high-deductible health insurance plan (if he or she uses your insurance as secondary coverage)2
Also, if you also have dental insurance, vision insurance, disability, and long-term care insurance, you may still open a health savings account if you choose to.
Benefits of Having an HSA
A health savings account is an excellent way to pay for medical expenses and there are many benefits of having one. Here are some of the most prominent benefits of having an HSA:
- HSA funds can be used to meet your deductible
- You own and control the HSA and any money in it (even if it is employer-sponsored)
- Any unused money in your HSA rolls over at the end of each year
- You don’t pay taxes on the money you put into your HSA or the money you use to pay for eligible medical expenses
- Some HSAs pay interest on the unused money in your account or invest it
- HSA funds can be used for health insurance premiums when you’re between jobs
- Your HSA funds can be used to pay for all parts of your drug rehab program, including specialized therapies and treatments like acupuncture or massages
- Your family and friends may contribute funds to your HSA if they would like to help you pay for drug rehab (they must follow the guidelines set by the IRS)4
Does an HSA Cover Drug Rehab?
Yes, you can use your HSA to pay for drug rehab. Under the rules set by the IRS, if you have an HSA, you can use it to pay for the following aspects of an addiction treatment program:5
- Drug and alcohol addiction treatment at a rehab center (including food and lodging expenses)
- Fees and transportation costs to attend Alcoholics Anonymous (AA) meetings when it is recommended by a healthcare professional
- Your transportation to and from a rehab center, as well as the transportation of a family member who visits you (some restrictions may apply, such as if there is a treatment option of equal value near you)
- Necessary medical care for a drug overdose and/or prescription medications used during treatment
- Holistic treatment methods like massages and acupuncture when it is recommended by a healthcare professional
Although you can also use HSA funds to pay for other out-of-pocket expenses that the IRS does not consider a qualified medical expense, you will need to report that amount with your income and you will be required to pay taxes on it, with an additional 20 percent.
It’s also important to specify that your HSA has to be set up and funded before you can use it for any medical treatment expenses. That means if you want to enroll in drug rehab now but you do not already have an HSA set up, you will need to find alternative ways to pay for your treatment.
How to Use Your HSA to Pay for Drug Rehab
If you have an HSA and you want to use it to pay for drug rehab now, the first step is to contact the financial institution that manages your HSA and tell them what you’d like to do. The admissions representatives at Nova Recovery Center are also available to help you navigate this process and coordinate payment through your HSA. Our goal is to make the process easier so you don’t have to stress about paying for rehab.
If you have family members or friends who want to help you pay for rehab, you can ask them to contribute to your HSA by following the guidelines set forth by the IRS. This can help reduce any remaining out-of-pocket costs for rehab.
If the money you have in your HSA does not cover the total cost of drug rehab, you may choose to pay the remaining balance out-of-pocket and reimburse yourself later once you have accumulated the funds in your HSA. When that time comes, you can request a reimbursement from the financial institution that manages your HSA.
Other Ways to Pay for Drug Rehab
If you do not already have an HSA and you’re looking for alternative ways to pay for drug rehab, here are some other options you may want to consider:
- Employee Assistance Programs (EAPs) – These confidential employer-sponsored programs are designed to help employees, their children, or spouses obtain access to treatment services for personal issues like addiction. If your employer offers an EAP, please contact a Nova admissions representative today to explore this option further.
- Financed healthcare loans – Your ability to obtain a healthcare loan will vary depending on your credit history and current financial circumstances, but a private loan may allow you to pay for treatment over a greater period of time with monthly payment installments. Call Nova Recovery Center today to learn more about this payment option.
- Credit cards – Using a credit card to pay for addiction treatment isn’t ideal, but it can work if you have no other option. You can minimize lofty interest fees by applying for credit cards with a low-interest rate or no interest.
- Crowdfunding – Websites such as GoFundMe, Fundly, FundRazr, or GoGetFunding are excellent resources that can help you raise money for your addiction treatment. These sites are especially helpful if you have lots of family and friends who want to contribute to help you pay for your treatment, but even strangers can choose to donate.
Start Your Addiction Treatment Plan Today
There are many different ways to pay for drug and alcohol rehab but using your HSA is an excellent option. To learn more about paying for rehab with HSA funds, please call (512) 605-2955 to speak with a Nova representative today.