Flex spending with Definity health insurance

[ElGuapo]

I'm a first-time participant in a flexible spending acct this year; we put in $750 for my son's cleft soft palate operation, which ended up costing less than we expected. So it would appear we may have thrown away some cash, but here's the twist:

My company's health insurance this year switched to a group called Definity that works through a regular PPO (Beechstreet), but essentially gives you an account, called PCA, that is used to cover the first $1,500 of the $2,000 deductible. AND, unlike flex spending, money you don't use from your PCA carries forward to next year.

SO, it makes sense to me to ask Definity to let me cover the first $750 myself out of flex spending, but their rep tells me there's no way to do that. Is she right? Anything else I might think about doing?

I'd appreciate any help on this subject that I find so confusing.

[oriecat]

What does PCA stand for? It kind of sounds like the new HSAs.

I think it's hard to know without knowing the specifics of your plans. But I don't see why they couldn't allow you to do that.

Perhaps one way to get around it would be to ask your doctor to bill you directly instead of going through the insurance. That way you could pay the entire bill yourself and submit it through your FSA for reimbursement.

That's the only thought I have...

[GBurns]

If, as Oriecat puts it, you pay your portion which you say will be less than $750 and submit for reimbursement through the FSA, How will Definity know? Or is that when the Doctor bills them as the insurance company they (Definity) then decide what is your portion and unilaterally take it from your PCA thereby giving you no options?

What does your SPD etc explain? Is there a conflict between any documents and the enrollment explanation?

In any case, you should discuss it with your Benefits or HR people, because this might not be what your employer thought that they bought into.

What state are you in?

[ElGuapo]

PCA stands for "personal care account"; what does HSA stand for? I thought (too late) of the idea of having the doctor bill directly to me, but the total bill is more than my $750 anyway, just not enough to use my $1,500 PCA and my flex money.

The thing they emphasized with this new plan is that by giving you an account to manage that hopefully people would be more cost-conscious with their health care, but at the same time encouraging preventive stuff (like an HMO) by fully covering (i.e., not charging your PCA for) regular checkups, etc.

I'm in Utah, the company is based in Wisconsin. I had heard word-of-mouth that you had the option of paying flex dollars first, but never from an official source. I do think our HR people would be surprised--it almost makes flexible spending accounts incongruent with the health plan.

Thanks again for any comments.

[Mary C]

Your plan is one of the new "consumer driven" plans. They are typically set up with 3 tiers -

1. The first tier, the pca account in your case, pays 100% of the procedure up to the PCA balance. If you have a healthy year and don't use the entire balance, it "carries over" to the next year. Sort of a "Benefit Bank" to offset any expenses that would normally apply to the second tier in succeeding years.

2. The second tier is employee or participant pay all. Our plan is set up where this tier is the same amount as the first tier. In other words, if your PCA is $1,500, and you use the entire account, then you are responsible for the next $1,500 in expenses you incur.

3. Third tier is similar to traditional insurance with co-pays, etc.

If you son is having cleft palate surgery, then total expenses incurred including doctor and hospital will probably exceed your $1,500 PCA. In that event, there should be no problem submitting them to your FSA.

HSA stands for Health Spending Account where you can set aside tax free dollars to help pay the deductible for a high deductible health care plan.

[GBurns]

You are probably right, your HR people might be surprised. Make sure you tell them. This might not be what your company thought that it was buying.

There is also the question of whether or not an FSA can even be used with this type of HRA arrangement (the PCA) in the first place. If it can be used, What do the various Plan Documents state about the ordering rules, FSA first or HRA (the PCA) first? All of this is beyond the "say so" of any sales rep. and should be taken to a higher level. There are written rules to be followed.

*******

MaryC

If the portion that ty04780 has to pay is, for argument $2,000, your example seems to say that $1,500 will be paid from the PCA leaving a balance of $500. In your example the PCA pays first, although this might not be what the FSA PD states. Even if this was then submittable to the FSA and paid, there would still be $250 left in the FSA which ty04780 is stating will be lost. How can ty04780 save this $250 from the "use it or lose it" of the FSA?

[Mary C]

G burns -

Why couldn't a company have both a consumer driven plan and an FSA?

after the first $1,500 in health care expenses, which are paid directly from the plan's reimbursement account, the participant would be 100% responsible for the next $1,500 in expenses. Even after surgery if there were $250 left in the FSA account, it could easily be claimed for any expenses the participant is 100% responsible for the rest of the year. And don't forget any OTC expese that the plan would not cover anyhow, if permitted by the FSA plan.

Our FSA plan document simply states that any unreimbursed expense, other than cosmetic, is eligible. That could encompass the entire $1,500 the participant would be 100% responsible for under the consumer driven plan.

Also, I am working on the assumption he's talking about 2004 expenses in which case there are 10 more months before the money is "thrown away". Its too late to plan for 2003 expenses.

[Guest mikeak]

I have Definity and they also administer our FSA. Our company's arrangment with them is that all claims that come in (whether from providers or by reimbursement request) are paid first out of the FSA since it is 'use it or lose it' and then from the PCA after all FSA funds are exhausted. (BTW, I haven't kept up, are FSA's still current year only or did the $500 rollover proposal get implemented?) This takes some of the 'F' out of FSA, especially for items such as OTC expenses unless you decide to stock up on enough now for next flu season.

[GBurns]

MaryC,

Look to the Revenue Rulings etc and many articles written explaining. Also note your own comment..."if permitted by the FSA plan." If not permitted, then what happens? If not permitted, Why would there be both?

mikeak,

You say that your Definity has FSA first. MaryC says her Definity has PCA first. ty07480 says that the rep said that the FSA was not allowed to be first. The Definity site implies PCA first. It seems that there is some confusion as to what is really allowed.

[ElGuapo]

Thanks for the comments, everyone. Mary C's description of consumer driven plans is exactly what Definity does, except for this year (the implementation year) they gave us an extra $500 of PCA--so it's $1,500 PCA then $500 out of pocket and then traditional insurance (90/10 I think).

Our total bill was only about $1,900, so my responsibility is only $400 if PCA dollars are used first. Make sense? So, yes, there are still ten months to figure out how to use the money, but that seems stupid since we've already had a qualifying expense and don't want to go buy a new pair of glasses and a year's supply of aspirin. And doesn't that defeat the purpose of a consumer driven plan?

That's interesting to hear mikeak's company has a different arrangement with Definity (flex dollars first). Definity's rep actually mentioned that they have another employer group with that arrangement. I would think they should all work that way, otherwise out-of-pocket expenses become much too hard to predict. I bet at year end we have a lot of people who've gotten in the habit of doing flex spending upset to find they wasted their money.

[Guest mikeak]

Just called Definity to check on this for current year. Rep verified that FSA $ are applied to claims first followed by PCA after FSA is exhausted. He also claimed that was the way Definity works for every client where they administer both.

What makes that more interesting is that we just got our first month's claims summary and they applied PCA dollars, not FSA dollars, for the initial claim. This happened last year until they determined 'oops, we need to redo this'.

Definity and CDHC both have a ways to go.

[GBurns]

Sounds like there are some companies that should seek legal advice about how to correct the problems. You cannot just say "oops". It seems that the Plan Documents either do not allow both or more likely have no "ordering rules" and even then under either scenario were not operating in compliance with their Plan Documents. The need for "ordering" was clearly pointed out by the IRS and by many explanatory articles written since.

[Guest mikeak]

The SPD is clear that FSA $ are applied first, PCA after FSA is exhausted. The 'oops' I referred to was (is) administrative error by Definity, though I wonder if they would have caught it had I not asked.

[GBurns]

If you go by what is on their website, the materials used at conferences such as the recent Galen event, their press releases and what they have given to at least 1 employee group, their Plan was not designed with FSAs in mind nor compliance with the Revenue Ruling etc. They would not have caught it if you had not raised the issue and I do not think that they have corrected anyone else's plan because I do not think that they yet know what to do.