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Insured Medical Reimbursement Plans?

Guest mab

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I have a client who was approached by an insurance organization which states it converts uncovered medical expenses into insurance premiums by processing them through an insurance company. This would allow the S-corp owner to get an above the line deduction for items that would otherwise be deductible only on Schedule A. This plan only covers the owners. The process begins with the client submitting medical expenses to the primary carrier. When the expense is rejected, the client pays the bill and submits the claim to this company's claim processor (along with a processing fee of course). The company then reimburses the client for the claims and submits a bill to the client's corp. for premiums equal to the amount of the claim plus 10%. The S corp then pays the bill as a health insurance premium and according to the company, can treat it as such for tax purposes.

This seems wrong on many fronts. Has anyone dealt with this type of "plan" or know if this type of arrangement is view by the IRS as legitimate??

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