The PHIT Act: Could This Be the Game-Changer for American Health?

The High Cost of Staying Fit in America

Fitness-related expenses are soaring, making it increasingly difficult for many Americans to maintain an active lifestyle:

• Gym Memberships: The average monthly gym membership costs $50-$100, with premium facilities charging $200 or more per month. (IHRSA Market Report 2023)
• Home Fitness Equipment: Retail fitness equipment spending reached $14.8 billion in 2023—up 40% from pre-pandemic levels. Treadmills alone can range from $800 to $5,000, making them inaccessible to many. (Allied Market Research, 2023)
• Financial Strain on Consumers: A 2022 survey by RunRepeat found that 47.6% of gym-goers considered canceling or had already canceled their memberships due to rising costs.

For many Americans, the cost of staying fit isn’t just a burden—it’s a barrier.

Understanding the PHIT Act

The PHIT Act aims to reduce these barriers by allowing Americans to use tax-advantaged accounts like FSAs and HSAs to pay for fitness expenses.

Key Provisions of the PHIT Act:

1. Allow gym memberships, fitness equipment, and organized sports fees to be FSA/HSA-eligible.
2. Eliminate the need for Letters of Medical Necessity (LMNs) for these expenses, simplifying the process.
3. Set annual spending limits: $1,000 for individuals and $2,000 for families.

The Role of Third-Party Services: Truemed and Letters of Medical Necessity

Currently, services like Truemed have emerged to help individuals obtain Letters of Medical Necessity (LMN) for fitness expenses. These virtual LMNs allow individuals with qualifying health conditions to potentially use FSA/HSA funds for fitness memberships.

Important Compliance Considerations

The IRS has been clear about the limitations of Letters of Medical Necessity:

• LMNs must be strictly medical in nature
• Using LMNs primarily for wellness can be considered potential fraud
• Administrators have strict guidelines for accepting such documentation

Who Benefits from the PHIT Act?

With 99 million Americans holding FSAs or HSAs (Employee Benefit Research Institute, 2023), the PHIT Act has the potential to create wide-reaching impacts:

• Consumer Savings: By allowing fitness-related expenses to be reimbursed tax-free, consumers could save an average of $290 annually per participant. If half of eligible account holders utilized this benefit, it could generate over $7 billion in tax savings nationwide.
• Increased Accessibility: By reducing out-of-pocket costs for gym memberships and equipment, more Americans will have access to preventive health measures that can reduce chronic diseases and improve overall health outcomes.

Criticisms and Challenges

While the PHIT Act offers clear benefits, it’s important to address some criticisms:

1. Does It Solve Cost Issues?
   • Tax-advantaged accounts help reduce the after-tax cost of fitness expenses, but they don’t address rising retail prices for fitness equipment or membership fees.
   • Gym memberships have increased by 28% since 2019, and home fitness equipment prices have risen by 35% in the past three years. For lower-income individuals who cannot afford these upfront costs, the tax benefits may not be enough to incentivize participation.
2. Equity Concerns:
   • FSA and HSA access is tied to employment benefits, meaning many part-time or lower-wage workers—those who could benefit most—may not have access to these accounts.
   • Urban areas typically have more fitness facilities, leaving rural populations with fewer options even if the PHIT Act passes.

While these concerns are valid, the PHIT Act is a step in the right direction. By making fitness more affordable for millions of Americans, it lays the groundwork for broader accessibility initiatives.