cafeteria plan payments

[Guest jimford]

Must the claim payor for a 125 plan obtain proof that an employee has actually paid the deductible amount or co-pay amount to the provider before reimbursing the employee? Alternatively, is an explanation of benefits form showing the benefit plan's payment and the various amounts not paid sufficient? The concern is that the provider may accept the benefit plan's payment as payment in full and not require the employee to pay the provider the amount of the deductible or co-pay. In this case it seems the employee would be receiving "tax free" money for his pocket.

A second question on this topic involves the use of a so-called debit card. The program uses a Visa card and the employeeuses the card to be "instantly reimbursed for copays, prescription glasses and other items not covered by the employees benefit plan. Supposedly the card will only be useable for certain merchant category codes (23 out of more than 500). The concern is that the card may permit the employee to access his funds for items not permitted under Sec. 125. The regulations appear to require a written statement from the employee that an expense is not and has not been reimbursed under any other health plan coverage.

[Guest jreddi]

I wish I could answer both parts of this question, but I can only speak on the first part.

Technically, the employee can file for reimbursement when the expenses are "incurred" not necessarily when they are paid. This could work for things like orthodontia, when the orthodontist presents a bill for, say, $3,500 and works out a payment plan with the employee. If the orthodontist presents a bill for the entire amount, then the expenses are incurred, but not necessarily paid and the employee would be eligible for the reimbursement. I think that an EOB would be sufficient to use to as proof that the expenses were incurred. Not as tight as I would like it, but it's my understanding that thems the rules!

[Guest CLKeown]

It is my understanding that expenses are to be considered "incurred" at the time of service.

On Dec. 1, 1999 Lisa Posted the following:

"Remember it is when the service is rendered not when formally billed, charged, or paid that determines the date of service. The service must be claimed during the plan year for which it is incurred, therefore; 18 months of treatment must be claimed over the two plan years it spans. A copy of the treatment plan and the contract should detail the banding and monthly costs.

You might want to subscribe to a legal guide such as the one put out by the Employee Benefits Institute of America or partner with one of the companys that specialize in 125 Plans, so that this expertise is readily available."

This is especially helpful when dealing with terminating employees. I have wintessed an employee (who is being laid off) turn in a receipt for almost 700.00 in plan expenses, for services that will not be rendered until after their termination date.

It is my understanding, that as the services are not performed until after her termination date, they are not eligilbe for reimbursement.

Carole

[Guest jimford]

Thanks for the comments. However, isn't there a difference between an expense being "incurred" (a person sees the doctor or stays in the hospital) and when it is billed or paid? Isn't the incurred date used to determine which year the expense belongs to? Person is treated 12/1/99-12/15/99. Provider produces bill 1/5/00. Insurer processes claim 1/15/00 and issues an EOB advising a deductible of $x and coinsurance of $y. Person pays $x and $y on 1/25/00. Isnt't the expense incurred on 12/1-15/99 and reimbursement available out of the 1999 medical Reimbursement Account? But what if the provider accepts the insurance payment as full payment (as some do)? Is the person entitled to be "reimbursed" for an expesense he has not had? Sorry to be so picky but I have been reviewing some of the IRS audit guidelines and questions are coming up.

[Lisa Hand]

That is why the expenses must be processed through any available insurance prior to being claimed in the 125 plan, why there is a close-out period after the end of the plan year in most plans to allow that to happen and why the regulations require written request for reimbursement from the participant AND independent third-party verification of the expense. If this is followed the participant can not get reimbursed for amounts paid by other sources.