HSA (HCRA) and termination of employment

[Guest mfocke]

Have a health care reimbursement account for 2006. Terminated employment with employer on Jan31st of 2006. By that time I had "deposited" $ in my HCRA. In mid Feb, made claims exceeding the amount in the HCRA which fell into 3 categories:

1. Expenses incurred 1/30 or prior

2. Expense incurred 1/31 (my last day)

3. Expense incurred 2/8

HCRA administrating company paid:

1. All

2. Denied saying "incurred following account cancelation"

3. Denied, same as #2

I called them, they agreed #2 was an error but were unclear as to why #3 would be denied saying something about "termination" but unable to point to law or prior supplied information that would support that view.

Neither the company information packet nor the administrator's web site speaks to any restrictions other than the well known "use it or lose it" restrictions. And I had though that, while my termination might stop any contributions, any expenses incurred during the plan year would be eligable to be reimbursed from what had already been "deposited" into the HCRA account.

Insights anyone?

[leevena]

Sorry, but could your question is somewhat confusing.

What type of a reimbursement plan do you have? Your question is listed under HSA, but you mention the "well known use it or lose it" rule. HSA's do not have that rule, and since HRA's do not allow for employee contributions, I am assuming that you are asking about FSA's. Is this correct?

An FSA allows you to contribute $'s up to the limit put in place by the employer. You are allowed to submit cliams for reimbursement up to the maximum amount. If you leave prior to funding the full amount from you pay, the employer is liable. For example, you are allowed to shelter $1200 per year, and you have a $100 deduction once a month. You incure a $1200 bill in first month, and quit work. You can submit the entire bill and receive all $1200. You would have had only $100 deducted, but the employer would need to make up the difference.

What is missing in your example though, is the plan year dates. Check your plan year dates to make sure that your expenses/deductions are eligible. It appears that they are, but I cannot be sure.

[QDROphile]

If you have an FSA, your coverage probably ended as of Jan 31, when you were last employed. The uniform coverage rule does not require coverage for the entire year if you are not eligible for coverage for the entire year. It does not matter what the plan year is. If you have an unspent balance as of the end of coverage, you should be offered COBRA and you can recoup your "contributions" by electing COBRA coverage. However, you could get into leapfrog with the COBRA premiums if your medical expenses are not bigger than the unspent balnce plus the COBRA premium for February. COBRA is probably available only through the end of the plan year, so the plan year is relvant for that purpose.

[Mary C]

from the acronym you used, I am assuming you are talking about neither an Healthcare Savings Account, or a Flexible Spending Account arrangement but a Health Care Reimbursement Account. We currently have one that is directly linked to one of our health care options. Becuase it is connected with the health care plan, coverage under it and eligiblity for reimbursement of expenses stops when participation in the health care plan stops. So if you were covered on January 31, those expenses are eligible for reimbursement. But if your participation in the health care plan stopped on that day becuase of your termination, then the expenses from 2/8 are not eligible for reimbursement.

the place to look for answers would be in the summary plan description for both the HRA and health plan under a topic such as "When Coverage Ceases."

[GBurns]

Regardless of what type of account this really is, I think that the issue of the termination has to be settled.

In my way of thinking a termination as of January 31st either includes a part of the day, the whole day or the whole week during which that date occurs.

Were the expenses that were incurred on 1/31 incurred after the time (not the date) of day of the termination? Did you see the Dr etc before or after you were told of the termination?

There also is a question, in my mind, about when health coverage can be terminated. In all non-small group plans that I can remember seeing, the coverage is paid for on a monthly basis. As a result the whole month of January would have been paid for. Can coverage be terminated by an employer while the insurer still has coverage paid for by the employee? In fact, can an employer terminate coverage or does the employer notify the insurance company to terminate the coverage under the policy issued by that insurer? In other words, Who really has the authority to terminate coverage?

Did you get a refund for the 1 day unused premium? Did the insurance company cover the rest of the charges incurred on 1/31?

I think it raises some serious issues if the insurer still honored coverage on 1/31 and paid their portion to the service providers but the reimbursemant account adjudicator does not want to reimburse for the co-pays etc for those same services.

As a separate issue, Was COBRA offered to you and what items was it offered on?

[Mary C]

As a member of our city's large employer health coalition, I can attest to the fact that very few employers carry coverage through the end of the month any more. The majority in our state stop coverage either on the last day worked (date of termination) or the end of the week that the termination occurs in. This is especially true if the employer is large enough to self bill for coverage. Also, our carriers end coverage at midnight on the day of termination. So if he went to the doctor on January 31 and his last worked was also January 31, his coverage under our plans would end midnight January 31.

[GBurns]

So it seems unlikely that coverage stopped immediately at the exact time of the termination, but most likely continued either for the rest of the day or for some short time after. This brings back the question of exactly when on 1/31 were these medical expenses incurred?

[Guest mfocke]

The account in question was a Health Care Reimbursement Account and I was told I was terminated long before the 31st but that was the official date of termination.

Upon appeal, the administrator did pay for the proceedure that occured the 31st. They also paid for another pre-31st proceedure that exceeded the amount I had paid into the plan.

It is interesting that you all say that the employer has to cover any unfunded but claimable expenses. We will see if I ever get called to reimburse. Hope you are right.

Thanks for the response.

[leevena]

Hi.

HRA's funds are the property of the employer, while HSA's funds belong to the employee. Also, employees cannot deposit funds into an HRA, only the employer may. With a HSA, both employee and employer can fund. Hope this helps.

[GBurns]

mfocke,

"The account in question was a Health Care Reimbursement Account " really means nothing. FSA, HRA, HSA, MERP, section 105 MERP etc are all Health Care Reimbursement Accounts, but each has different rules.

Since you have not clarified the issue, the replies have been rather generic rather than specific.

So far, you seem to have been reimbursed for expenses incurred before, up to and including January 31st and are now ahead of the game. Barring COBRA extension (if applicable) I would not expect any more reimbursement, unless this is an HSA, and unless there are more January 31st amounts still outstanding.