Health Reform Connect

The Internal Revenue Services ("IRS") issued an Action on Decision (“AOD”) regarding the issue of whether hormone therapy and sex reassignment surgery constitute medical care under §§213(d)(1)(A) and (9)(B) and are therefore a deductible expense. §213 of the Internal Revenue Code allows a deduction for expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer. Medical care includes amounts paid for the treatment of disease, but does not include amounts paid for procedures directed at improving the patient’s appearance, that do not meaningfully promote the proper function of the body or prevent or treat illness or disease. The Tax Court decided in a recent case that the plaintiff's gender identity disorder is a disease within the meaning of §§213(d)(1)(A) and (9)(B) and because the hormone therapy and sex reassignment surgery treat the disease the plaintiff may deduct the expenses for medical care under §213.   Employer sponsored Group health plans, including health reimbursement accounts, flexible spending accounts and medical savings accounts, are subject to Section 213.  Therefore, these types of expenses are reimbursable under these plans unless the employer specifically excludes such expenses.  If you have any further questions please contact Meghan Linvill McNab at 317-808-5863 or Kristen L. Gentry at 317-238-6288.