Flexible Spending Account - Need thoughts

GLC

I would like to get your opinion on a “sticky issue”. We had an employee turn in a credit card receipt for $2,500.00 to be reimbursed under the 125 Healthcare Flexible Spending Account. On her reimbursement form that all employees must complete to get reimbursed, she just indicated medical procedure. This employee recently had cosmetic face surgery because the procedure was highlighted on one of the local TV stations. We also recognized the doctor as a well-known plastic surgeon here in town. However, about 6 six years ago, this employee had breast cancer. She was a breast cancer survivor and done well over the years.

Our SPD has a list of items not covered under the FSA, of which cosmetic surgery is one of them. The exact sentence is below.

Cosmetic surgery or any procedure which is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness of disease.

When the employee was asked to provide more information than “medical procedure”, she became upset and said it had something to do with the reconstruction of her breast, which we really don't believe. However, we obviously have no way of knowing this, just our opinion. We don't want to be "hard noses" but want to follow our SPD.

When we showed her the page in the SPD that addresses cosmetic surgery, which I have given out for 8 years, she acted as though she had not seen it. She also said her procedure was covered under HIPAA and she should not have to provide more information. We asked her to provide something from her doctor showing that the procedure was due to her breast, actually the Finance Mgr did. I don't necessarily agree with it. I believe the cosmetic surgery sentence above would disqualify her from receiving any funds under the FSA. What do you think?

NaeNae55

Do you reimburse in house or do you have a third party do it? We have a TPA. Having a TPA helps keep the issue more professional and less personal. If you have a TPA, it is up to them to accept or deny her documentation.

Our employees must submit an EOB or bill for reimbursement, not proof of payment. I know some companies now use debit cards, but in that case you have proof they are actually paying for covered services at the time.

If her surgery is due to her breast cancer, it should be covered. That is reconstructive surger as opposed to cosmetic surgery (though both are typically handled by the same doctors). Further, if it is for breat reconstruction her regular health insurance probably covers it.

All you can do is go back to your Plan Document and do as it prescribes. Your hands are tied from doing anything else. It is a shame if she will lose the money, but it was her responsibility to make sure cosmetic surgery was covered in the first place. Since few policies cover it, I am betting that she just thought she could by-pass the system by using a credit card receipt.

If she does produce a bill, then the TPA will note the diagnosis code and decide if it should be paid or not. Without a TPA, that will be up to you.

Good luck!

Nae

GLC

We are a small agency and process in-house.

NaeNae55

Have you accepted someone's credit card receipt for documentation in the past?

I would tell her you need an EOB or bill to process. If she claims she has used credit card receipts in the past, then tell her you need to investigate those times. You may need to ask for additional documentation for those times or request a refund.

I have been the claims processor for our employees, both for health and for FSA claims so I know how difficult it can be to say no. However, your responsibilities are clear. If an employee started giving me flack I always reminded them of our appeal process and that I was just doing my job. In most cases they backed off.

Good luck!

Nae

FunHRBanker

We processed in house until 3 years ago. We always required an itemized receipt and our TPA is no different. They are actually more strict and want the EOB rather than a bill from the doctor's office.

Nae brings up a good point: if you've accepted that kind of documentation in the past, you're in for a tough fight. Beginning immediately I would change your practice.

Dutch2

We do about the same as Nae. All claims with receipts go directly to our TPA and they determine if the claim is eligible. It really helps in such situations when you don't have to be thd bad guy.

stilldazed

Agree with Nae. Follow your SPD, and that's not really being hard nosed. Confirm what your SPD says you can accept as a receipt. Quite frankly, I don't see how a credit card receipt provides enough info to substitute as an itemized bill with patient name, provider name, date of service, description of service, and cost of service. A credit card receipt is nothing more than a receipt for payment, except the payment was made with a credit card as opposed to a check or cash.

Another way you might present the message to the worker is that IRS rules of tax exemption govern, and if the IRS were asking because she was claiming the expense as a tax deduction on her tax return, it would be her responsibility to prove to IRS that the charge is for a deductible expense, The fact that you offer Sect 125 FSA is a convenience for her but does not really change the rules of tax exemption.

If the surgery is covered by health insurance, the individual's out of pocket costs would also be tax deductible (including some incidentals like travel & hotel costs if needed), so an EOB is a good document to accept to validate medical necessity. Medical necessity can include cosmetic procedures if the procedure is to correct a birth defect or restore a part of the body lost to illness or accident. If your SPD is so limited that you won't allow the same documents as the IRS, it could also be a good time to review your SPD and determine whether a revision is due.

As for the HIPAA reference, I think she is mixing apples and oranges. She can only mean the privacy aspect, and nothing about HIPAA prevents you from getting the necessary info to administer your plan properly. HIPAA does not ask you to violate your SPD or IRS rules by not confirming validity of an expense, You still have a responsibility to do that.

best wishes