What are letters of medical necessity and when do they matter?

In consumer-driven health plans like FSAs (flexible spending accounts), certain expenses fall into a gray area — they may support a participant’s health but are not automatically eligible under standard guidelines. This is where a letter of medical necessity, or LMN, can play an important role. 

Understanding how and when LMNs are used can help ensure smoother claims processing and reduce confusion for both employers and employees. Let’s take a closer look at the what, when, and why behind LMNs.

What is a letter of medical necessity? 

 A letter of medical necessity is documentation from a licensed healthcare provider stating that a specific product or service is recommended to treat or manage a diagnosed medical condition. 

It connects the expense directly to medical care, which is required for certain items that are not always eligible.

When is an LMN typically required? 

Some expenses can be medical in one situation and for general wellness in another. An LMN helps clarify that distinction. Common examples include: 

• Nutritional supplements or weight loss programs
• Orthopedic or ergonomic equipment
• Certain over-the-counter treatments when used for a specific condition

Without an LMN, these items are often considered ineligible. With proper documentation, they may qualify if they meet plan and regulatory guidelines. 

What makes an LMN valid? 

To be accepted, an LMN typically needs to include: 

• An evaluation and diagnosis from a healthcare physician of the condition based on the patient’s medical history and symptoms
• A clear explanation of how the expense treats or manages that condition
• The provider’s recommendation for the treatment or service
• Provider credentials and signature
• A defined time frame for the recommendation 

LMNs should be obtained annually and retained with other expense documentation. An LMN provided by a paid telehealth service that relies on self-reported health information or questionnaires is not a valid LMN. Incomplete or vague letters are one of the most common reasons claims are delayed or denied.  

Where issues commonly arise 

Challenges around LMNs usually stem from: 

• Lack of awareness. Participants may not realize an LMN is required until after a claim is submitted.
• Insufficient documentation. Letters that do not clearly tie the expense to a medical condition cannot be approved.
• Timing gaps. LMNs should be obtained before or at the time of service, not retroactively. 

These situations can create frustration for participants and additional administrative work for employers. 

What employers can do to help 

Employers play a key role in helping participants navigate these requirements. Simple actions that drive better outcomes include: 

• Reinforcing when an LMN may be needed during enrollment and throughout the year
• Encouraging employees to review eligibility guidelines before incurring expenses
• Directing participants to Omnify with questions early in the process 

When expectations are clear up front, the process becomes significantly smoother for everyone involved. 

At Omnify, we work to make the LMN process as clear and efficient as possible. We help review documentation, guide participants on requirements, and ensure claims are evaluated consistently in line with plan rules and per IRS requirements. When questions come up, early engagement allows us to provide clarity before issues develop. 

Letters of medical necessity are not barriers. They are a way to ensure certain expenses are used appropriately within the guidelines of the plan. With the right documentation and a proactive approach, LMNs can be a straightforward part of delivering meaningful benefits to employees.