Consumer Spending Account payments not allowed for this service (Updated for 2026)

Common Causes for CO-187

Denials with code CO-187 typically happen for the following specific reasons:

• The billed service or item constitutes a dual-purpose or cosmetic service (such as massage therapy, teeth whitening, or dietary supplements) that is not automatically eligible under IRS Section 213(d) without a Letter of Medical Necessity.
• The patient has a Limited-Purpose FSA or HRA which restricts coverage solely to dental and vision expenses, and the submitted claim was for general medical services.
• The provider's credit card terminal or merchant system is configured with a non-healthcare Merchant Category Code (MCC), causing automated point-of-sale systems to reject the consumer spending card transaction.
• Inadequate documentation, such as the absence of a detailed itemized receipt or prescription, was submitted to substantiate the eligible medical nature of the expense to the account administrator.

How to Prevent CO-187 Denials

To avoid receiving this denial in the future, implement these specific checks:

• Verify the patient's specific consumer spending account type (e.g., standard FSA vs. limited-purpose FSA) and its eligible expense guidelines prior to processing card payments.
• Secure and file a comprehensive Letter of Medical Necessity (LOMN) signed by the treating physician for any dual-purpose treatments or over-the-counter items before submitting claims for reimbursement.
• Verify with the merchant services provider that the medical practice's point-of-sale terminal is properly classified with a healthcare-specific Merchant Category Code (MCC).
• Provide patients with highly detailed, itemized receipts containing the patient's name, provider name, date of service, CPT codes, and exact dollar amounts to streamline the administrator approval process.

Appeal Letter Template for CO-187

If you believe this claim was denied incorrectly, you can use the following template to submit an appeal.

[Your Practice Header]
[Date]

[Payer Name]
[Appeals Department Address]

RE: Appeal for Claim [Claim Number]
Patient: [Patient Name]
ID: [Patient ID]
Date of Service: [Date]
Denial Code: CO-187 - Consumer Spending Account payments not allowed for this service

Dear Appeals Department,

I am writing to appeal the denial of the above-referenced claim, which was denied with code CO-187: "Consumer Spending Account payments not allowed for this service".

We are appealing the denial of payment under code CO-187 for the service rendered on [Date of Service]. Under Internal Revenue Code Section 213(d), qualified medical expenses include treatments, diagnostics, and preventive care prescribed by a licensed professional to mitigate or treat a specific medical condition. The provided service, [CPT Code], was medically indicated to treat [Diagnosis/ICD-10 Code], as demonstrated by the enclosed medical records and the treating physician's Letter of Medical Necessity. Because this service directly addresses a diagnosed medical condition and satisfies IRS guidelines for qualified health expenses, we respectfully request that this denial be overturned and the payment from the consumer spending account be authorized.

Attached please find:
1. A copy of the original claim.
2. The relevant medical records supporting the service.
3. [Any other supporting documents].

We respectfully request that you reprocess this claim for payment.

Sincerely,

[Your Name]
[Title]
[Practice Name]