Flexible Spending Account (FSA) – For Businesses with 5 or more employees
Q. Can a member use a medical flexible spending account (FSA)
to pay for a spouse’s deductibles, copays or other out-of-pocket
medical expenses?
A. Yes. A medical FSA can be used to cover eligible medical expenses for the
member, the member's spouse, and dependents (as defined in IRS Code Section
125). However, health insurance premiums may not be reimbursed through your
medical FSA.
Q. What is an “eligible expense” under the
medical FSA?
A. An “eligible expense” means any item for which a member could
have claimed a medical expense deduction on an itemized federal income tax
return (without regard to any threshold limitation) for which the member has
not otherwise been reimbursed from insurance, or any other source. Premiums
for accident or health coverage under any other plan are not eligible
medical expenses. Also, premiums for long-term care insurance are not eligible.
Members are encouraged to consult their personal tax advisor or IRS Publication
502 for further guidance on what is or is not an eligible medical expense.
Q. What is the “crossover” feature?
A. Crossover is the convenient electronic feature of Blue by Design FSA that
connects the member's providers, the health plan, and the FSA. If a member
has crossover, claims are submitted electronically from the health plan to
the flexible spending account, which means less paperwork for the member.
Members also have the option of having reimbursements sent to them as a check
or deposited directly into a checking or savings account, without completing
any paperwork.
Q. What happens if a member terminates employment during
the plan year?
A. The member will have an additional period of time (a run-out period) after
termination to submit claims for reimbursement. Health care services must have
been provided before the member's benefit termination date, unless the member
continues contributing to his or her medical FSA through COBRA.
Q. How are claims for orthodontia expenses reimbursed?
A. Many long-term medical treatment programs, such as orthodontia, can span
several plan years, which affects the process of reimbursement. The standard
procedure for refunding eligible orthodontia expenses is to reimburse these
claims according to the financial contract/agreement the member has with
the orthodontist and/or insurance company, which itemizes eligible expenses
during each plan year.
Q. What happens to the account balance if the member doesn’t
use all the money deposited for the current year?
A. The IRS’s “use it or lose it” rule states that the member
will lose any money left in the account(s) after the plan year run-out period.
Q. What happens if the member has eligible medical expenses
at the end of the plan year and a claim is not submitted by the
end of the plan year?
A. The member will have a run-out period in the following year to submit claims
for eligible medical expenses on services provided during the plan year. Check
plan materials for specific information.
Q. Can a member change the amount of money set aside in
a Blue by Design account(s) during the plan year?
A. Generally, a member cannot change his or her election until the next enrollment
period. However, a member may be allowed to make changes during the year if
he or she has a qualifying election event as defined by the IRS. Events may
include: marriage or divorce, the gain or loss of a spouse or dependent child,
a spouse becomes eligible for or loses medical coverage, a spouse starts or
stops working full-time. The member has a limited number of days to make a
change after the event has occurred. Refer to plan materials for specific information.