Many expectant parents wonder if cord blood banking is covered by their health insurance or can be deducted from their taxes as a medical expense. There are, in fact, times when cord blood banking is considered an eligible medical expense covered by a family's HSA, FSA, HRA or health insurance plan and can qualify as a tax deduction. Let’s explore.
Health insurance, FSAs, HSAs and HRAs
In general, cord blood banking may be covered by medical insurance, recompensed by a Health Reimbursement Arrangement (HRA) or eligible for pre-tax dollars from a health savings account (HSA) or flexible spending account (FSA) if it is going to be a part of a proven treatment for an existing or imminently probable condition.
Cases similar to our first transplant, where the baby’s cord blood was immediately used to treat his brother’s cancer and save his brother’s life, are eligible because it represents a proven treatment for an existing condition.
This doesn't mean that cord blood banking is always open to these options. If parents choose to preserve their baby’s cord blood because they want to help safeguard their family's future, they most likely cannot use their HSA, FSA, or HRA to pay for the service, and it will not be covered by their health insurance. This can be disappointing for parents who may not be currently affected by a disease that cord blood treats but want to preserve their baby’s cord blood because they have conditions that run in their families, have seen first-hand the effects leukemia or sickle cell, or aspire for a better day when stem cells can treat Alzheimer’s, stroke, and much, much more.
Experimental treatments are also not currently covered. This means treatments cannot include FDA-approved clinical trials even if the outcome is favorable. Although there are a number of clinical trials authorized by the FDA to use cord tissue to treat a wide spectrum of diseases, standard clinical treatments using cord tissue are still pending full FDA approval.
There are also certain conditions where parents can deduct the cost of cord blood banking from their taxes, too. Out-of-pocket medical expenses that exceed 10 percent of a filer’s income are eligible for a tax deduction, and cord blood banking can contribute to that figure so long as it is, again, shown that the medical expenses were part of a proven treatment for an existing or imminent condition.
The need for parents to prove they're banking their baby's cord blood for an existing or imminent condition may change in the future. In 2013 and 2015, bills were introduced to Congress to try to get cord blood banking as a whole re-classified in the Internal Revenue Service’s tax code as a medical expenditure. Unfortunately, these do not represent a sudden, new interest in Congress to change the tax code to enable tax deductions for all parents who bank their baby's cord blood. Similar measures calling for partial tax breaks were also submitted in 2006 and 2007 and similarly did not get very far.
There is always a reason for further hope. As new stem cell treatments are discovered and become approved as regular treatments, the need to privately store cord blood will continue to spread and, hopefully, be a cause of action for Congress. Of course, tax deductions and medical reimbursement still pale in comparison to the peace of mind and money saved by banking.