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Correcting Insurer Error under HDHP


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Employer X offers its employees a health plann with a menu of choices. One of the options available to employees is a high deductible health plan ("HDHP") in tandem with a health reimbursement arrangement ("HRA"). Normally, the HDHP would have declined claims for expenses and applied them to the deductible until it was reached. However, the employer would pay those amounts to the employee under the HRA.

It was recently uncovered that the insurer had been paying claims incurred from the beginning of the year under the HDHP in spite of the deductible (so the plan was working in direct opposition to the way it would currently work). The HRA is, of course, funded by employer money. Once this situation was uncovered, it was corrected prospectively. However, for those employees who were reimbursed under the HDHP, what options are available to effect correction? The only options occurring to me are: (1) treat the employees' reimbursement as if they had actually been made under the HRA rather than the HDHP but credit these amounts toward the deductible under the HDHP (this might require a wash transfer of monies from the employer to the insurer and vice-versa); or (2) require the employees to reimburse the insurer for the amounts incorrectly paid under the HDHP and the employer would cut a check for an equal amount under the HRA. If this option is chosen, does the employer have to tax-report those amounts paid to employees who fail to reimburse the plan?

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I think #(1). With the HRA (hopefully it is 'integrated' with and the HDHP is itself minimum essential coverage), the medical expense is going to be paid by someone other than the employee or the employee will be reimbursed for having paid it. The error is that the payments were not debited from the HRA ledgers and not credited against the deductible obligation. Make those debits and credits and that should resolve it.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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