Billing Tree’s 2015 Collection Agency Operations and Technology Survey showed that 56% of collection agencies don’t collect healthcare debt payments from Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA), and of those, 35% would like to begin doing so. Using medical spending accounts to pay bills has its own rules and regulations, though, so before you commit to it, here are a few things to keep in mind specific to FSAs.
- Accounts can be used to pay medical expenses. The medical expenses must be qualified expenses. According to IRS Publication 502 qualified medical expenses are “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.”
- The list of qualified medical expenses is very large. According to IRS Publication 969, the list includes:
- Medical expenses such as doctor visits, laboratory tests, medical equipment, and hospital services. Examples include provider visits & care, diagnostic & preventive care, programs and treatments, medical equipment/support/transportation, and hospital visits and service.
- Dental expenses: eligible expenses include non-cosmetic dental treatments such as crowns, dentures, diagnostic services and fillings.
- Vision expenses: eligible expenses include eye doctor appointments and vision correction material such as contact lenses, eye glasses and related materials, eye drops, eye examinations, and laser eye surgery.
- Prescription expenses: all legally obtained prescriptions, including any prescribed over-the-counter medications.
- Accounts can now have a debit card. When FSA’s were first introduced the employee would pay for an eligible product or service and then submit the receipts to the employer or plan administrator and wait for reimbursement. There were two problems with this method; (1) receipts were often lost before they could be submitted and (2) reimbursement took a long time.
The fix for these issues came about in the late 1990’s with the issuance of FSA debit cards. Swiping the card automatically withdraws money directly from an employee’s spending account at the point of sale, without the use of a pin number. While these debit cards look and work like any other, they must only be used for qualified medical expenses.
- A lot of rules and regulations come with accepting FSA cards.
Because of the possibility of card-use on ineligible expenses, the Inventory Information Approval System (IIAS) standards were born in 2005. It was officially approved by the Internal Revenue System in July of 2006, in IRS Notice 2006–69. According to the IRS the purpose is to provide “guidance on use of debit cards, credit cards, and stored value cards to reimburse participants in self-insured medical reimbursement plans, such as health flexible spending arrangements (health FSAs).” In other words, its purpose is to restrict the health spending debit card usage to only qualified medical expenses. That being the case, though, the agency that accepts the cards must have an electronic system with the ability to differentiate qualified medical expenses from non-qualified medical items.
So the choice as to whether or not to accept FSA cards to pay healthcare debt is up to you. There are advantages to it and there are significant rules to abide by. Considering that 90% of all employers in the United States offer some form of an FSA (according to FlexibleBenefits.com), accepting FSA payments might be a good option for your company.
BillingTree offers a unique opportunity for companies to expand their billing and payment footprint with their hospital and physician accounts. By demonstrating the benefits and value of allowing your firm to process on behalf of a healthcare provider, your company can accept Health Savings Account (HSA) and Flexible Spending Account (FSA) Payments. Click on the link to learn more about accepting Flexible Spending Account payments.