Flexible Spending Account (FSA) Frequently Asked Questions
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 an 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. On Oct. 31, 2013, the IRS modified the “use it lose it” rule for health flexible spending accounts. The modification gives employers the option to amend their FSA plan to allow employees to carry over up to $500 from the current plan year to their FSA for the following plan year. Contact your plan’s representative to discuss your plan options.
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.