Orthodontia and claims substantiation under a health FSA plan.

[Guest prattam]

I'm work in Third Party Administration where we administer health FSA and HRA plans. I was wondering how others would handle substantiation of orthodontia claims under a health FSA plan under the following scenario:

- a participant pays a discounted amount up front for 10 months of orthodontia work (say, $2,500). He/She is seeking reimbursement of the expense. Since the current law states that medical expenses are not reimbursable through a health FSA until they have been incurred; and that expenses are treated as having been incurred when the participant is provided with the medical care that gives rise to the medical expense, and not when he/she is formally billed, charged or pays for the medical care, how should this particular situation be handled? Should the participant be reimbursed the full $2,500 upon claims substantiation, even though all 10 months worth of services have not been incurred? Or, should the participant be reimbursed $250 each month (even though this may not be the actual cost of the treatment) upon submission of documentation which states that one month's worth of service has been incurred?

I know it seems that the answer is obvious. But I'm interested in knowing how others in the industry have handled this.

Thank you!!

[papogi]

We would go ahead and reimburse the $2500 up front, if the participant has paid these expenses up front. On several occasions, the IRS (specifically, Harry Beker) has made statements concerning ortho expenses, and the fact that they can be reimbursed without following the traditional rules. Each employer needs to make this decision as to how these expenses will be reimbursed.

[WDIK]

http://benefitslink.com/boards/index.php?showtopic=22641

http://benefitslink.com/boards/index.php?showtopic=15821

[Belgarath]

This answer is purely as a consumer - I know nothing about the actual administration of these plans. Both of our children had braces, but the first was covered under my wife's plan, and the second under mine. Her plan reimbursed it all up front, mine did the monthly reimbursement routine. The Plan Aministrator for my plan was very definite in her statement that my wife's plan did it incorrectly. My wife's Plan Administrator was just as adamant that their approach was perfectly correct. We didn't care one way or the other, (we were just glad we had the plans!) but found it interesting that there were such strong opinions in disagreement.