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Limited Scope FSA


Guest brobinso

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Guest brobinso

A participant has asked about reimbursement from a limited scope health FSA for a medical expense that is not covered by medical insurance at all - ie, speech therapy.

I do not see a way in which a limited scope FSA could be designed to allow this medical expense to be reimbursed.

Or would a post-deductible health FSA be able to reimburse the speech therapy after the medical deductible has been met (even though the therapy would not apply to the deductible)?

Am I missing something? Ideas? Opinions?

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What do you mean by "limited scope" ? What is it limited to?

An item does not have to be covered by the health insurance policy in order to be reimburseable by an FSA. An item only has to be a covered (by the FSA) item and be an eligible expense for medical care.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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We have a similar question to brobinso , we have a limited purpose, post deductible health FSA offered side by side with an HSA. Only dental, vision and preventive care expenses are eligible, along with any expenses that are incurred, once the employee has met their deductible may be reimbursed through the FSA. The HDHP contract excludes speech therapy except when it is required for treatment of a speech impediment or speech dysfunction that results from injury, stroke or congenital anomaly. We would presume that if the speech therapy is due to injury, for example, then the services would be subject to the deductible, and then once the deductible was met the expenses could be reimbursed from the FSA. But what if the expenses are not due to the above caveat? They are not preventive, so would you allow them once the participant provided proof that the deductible had been met , and then apply the post-deductible purchases (only) to the limited purpose FSA??

That is our question, not sure if BROBINSO's is the same...

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I agree. Once you have met the deductible of the insurance policy, then any FSA expense should be reimbursable.

I have 2 other questions with regard to the FSA along side of an HSA. I have heard that you can also pay for over the counter meds through the FSA before the deductible is met. Is that true? What about expenses for family members only (and not the employee) if the family members are covered by copay plans? Thanks

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I thought that the issue was having the FSA reimburse an expense for a procedure that was NOT covered by insurance, so the deductible should not be an issue since nothing would have been submitted to the insurance company in the first place.

I think of this as being no different from an employee whose insurance coverage does not include maternity, and who submits a claim for reimbursement for maternity care expenses. Maternity is not covered by the health insurance but the expenses of medical care for maternity are certainly eligible medical expenses under 105 and 125. Or you could think about prosthetic devices. Or eyeglasses if no vision coverage. Would you reimburse from the FSA?

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Brobinso--my first impulse was to advise you that speech therapy is an eligible expense under a post-deductible FSA (therapy is an eligible expense as noted in publication 502). However, if the post-deductible FSA is written so that the only eligible expenses considered are those that would have applied to the HDHP deductible (in your case, speech therapy doesn't) then speech therapy is not an eligible expense. If it were to pay those expenses, that would be first dollar coverage, which violates the intent of HDHP's and post deductible FSAs. (speech therapy would be considered a core health service whereas dental and vision are treated as non-core health benefits). Therefore, as ehs suggests, require that they first meet the HDHP deductible, then pay the speech therapy thru the post-deductible FSA. I'd be interested in hearing other comments on this scenario.

SLushkin: Is your companion FSA a special purpose FSA or a post-deductible FSA, or both combined? Special purpose FSAs can be set up for dental, vision, and preventive medical. Post-deductible FSAs are self explanatory. Preventive otc products would be covered under the special purpose FSA. Otherwise, all eligible otc products would be covered under the post-deductible FSA, presumably under the same scenario as with speech therapy in Brobinso's case. But yes, otc products are eligible expenses under a normal FSA. Basically, if it treats an injury or illness, it's an eligible expense. An exception would be otc vitamins, which are for general well being, not injury or illness.

Regarding payment for family members' expenses, remember that FSAs and HSAs are federal tax plans that are arms-length connected to personal tax returns. In other words, if you can claim a family member as a dependent on your tax return, then you can also claim their expenses under an FSA or HSA, regardless of what kind of plan they are covered by. (Children claimed as dependents can't have an HSA. Spouses can't contribute to an HSA if they have first dollar coverage. Spouses and dependent children can benefit from the other spouses HSA)

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