Liability insurance for excess Medical Reimbursement?

[Guest Dick Boever]

Does anyone know of a company that sells insurance to cover the loss which might occur when a participant terminates with a "balance due" on their medical reimbursement account. I have a law firm client that won't consider the medical FSA unless they can be assured of not incurring a loss.

I need an answer yesterday, if anyone can help. Thanks

[KIP KRAUS]

If you find someone to do it I'd be interested in what assumptions they use to underwrite it.

I suspect that the premiums would be more than the risk of taking the chance that somone leaves the firm owing.

[GBurns]

Since the Proposed Treas Regs indicate the need for the element of risk, don't you think that if the employer secures such insurance, that it would eliminate the element of risk thereby disqualifying the plan?

[mroberts]

I agree with gburns. Also, studies have shown that it all balances out when it comes to FSAs. Not too many people come up with a scheme at the beginning of the year to work the FSA plan. As a matter of fact, most employees have no idea what happens to their funds devoted to an FSA when they terminate, so I would say that it's not something worth insuring even if you could insure it.

[Guest Dick Boever]

I would agree with Kip that the premiums would probably be prohibitive. I think insuring the risk is acceptable under the regs, the whole idea of assuming risk is to make it like insurance, so to purchase coverage where you may get no benefit certainly qualifies as a risk.

I have seen at least one TPA market their services with the guarantee that the employer would not incur any out of pocket costs, including excess claims costs. I find it hard to believe the TPA is self insuring this risk. I can't remember which TPA or I would call them.