This seems confusing - because it is. Yes, your HSA distributions are indeed unreimbursed medical expenses.
Your HSA contributions are deductible on the federal return - but they are not deductible in New Jersy (one of only two states who don't follow federal law in this regard).
This means that the distributions on the federal level are for "reimbursed" medical expenses, because in this case, the payments are like insurance reimbursements (since you didn't pay tax on the contributions).
But in New Jersey, as we see, HSA contributions are not tax-deductible, so they are like ordinary after-tax dollars. This means that any HSA distributions made for qualified medical expenses are indeed "unreimbursed" medical expenses, because the HSA dollars are not tax-advantaged in New Jersey.
In short, so far as New Jersey is concerned, your HSA account is just another after-tax checking account. Think about it: if you paid for medical expenses out of your regular checking account, they would be unreimbursed, right? It's the same with the HSA distributions - but ONLY for New Jersey.
