Long ago (1988) I moved to Berkeley and started sending a monthly "newsletter" to my Boston friends. When I returned to Boston (1993), I continued the tradition for about five more years (or until I had kids). Looking back, I realize that I was actually blogging. Each newsletter contained anywhere from a few to several blog posts. Having been silent for the past decade or so, I've decided to resume these activities. Don't expect anything profound -- I tend to focus on what I find entertaining or amusing and perhaps sometimes informative. We shall see!

Wednesday, February 8, 2012

Flex Spending Account Hell

It seems that my Facebook posting about FSA (Flex Spending Accounts) garnered sufficient attention to warrant a blog post (and let's face it, I haven't blogged in quite some time).

For some background, just what is an FSA? (Wikipedia has, not surprisingly, a fine definition and discussion.) Briefly: an FSA is a way that you put pretax dollars away to cover medical expenses that you incur during the year that are not covered by your medical insurance. (I can assume you have medical insurance, because I live in MA and that's just the way we do things here.) There are also flex spending accounts for dependent care as well, but we'll defer that to another day too. The bottom line is that Medical FSAs are a way to reduce your tax burden for money that you're spending on medical care.

Now, they are also a bit of a game too, because you have to decide at the beginning of the year how much you want to tuck away, and (this is my favorite part) if you don't use the money you tuck away, YOU LOSE IT. You can't carry it over, you can't pay taxes on it and get it back, it is just gone. So this is a bit of a lottery where you are betting just how healthy/sick you're going to be for the year. I'd be very curious what algorithms people use to determine how much to put in their medical FSAs. It seems to me that dependent care (at least for kids) is a lot more predictable and makes a lot more sense, but predicting medical expenses would seem to require some form of voodoo from where I sit. Given that I have one child prone to mysterious medical maladies, our out of pocket expenses can vary dramatically from one year to the next -- in a healthy year, we have roughly 8 copays for the year (one physical and one eye exam for each of four people). In a bad year, we can have a hundred copays with multiple appointments each week to deal with the medical condition du jour. OK, perhaps a hundred is a little high, but we have had years with weekly appointments for one or more kids for the better part of a year.

Anyway, as much as the lottery aspect of the game bugs me, it's the increasingly onerous reporting process that really got me this year. I like to think that I'm relatively well-organized. Each time a reimburseable expense comes in, I toss the documentation in a folder marked "FSA" and then once or twice a year I go through the documentation, enter the numbers, dates, people, description into a spreadsheet and submit a claim. Normally, I get a check a few weeks later and everyone is happy.

This year was different. First glitch was that about midway through the year, I found our family eligible for a second FSA account around the time we had an expensive medical device prescribed that was not covered by insurance. Before socking away a ton of money in an FSA, I actually called the FSA company to verify that we could reimburse ourselves for the device and they gave me a clear yes and told me exactly what I needed to include in the claim (a letter of medical necessity). Between that device and a pair of glasses for me, I'd eaten the entire year's worth of FSA contributions on this account. I thought, "Great -- this claim should be really quite simple!" So, in December, I filed my claim with exactly two expenses: the device and my glasses. After four weeks I heard nothing, so I tried to call them (This in itself was a total nightmare. Because I had no ID number, they kept routing me to various places and it took something like six phone calls with a variety of automated systems from hell to get me to a human being who could actually do something). Finally I reached someone who said that the claim was held up because they wanted 1. to know if I had insurance coverage for eye glasses (No) and 2. proof that the medical device was not covered by insurance. Now, it might have been nice if they had told me there had been a problem processing the claim, but they told me exactly nothing, prior to my calling them.

I explained that I had no coverage for eye glasses and they said, "OK, we'll just put this right through." Then we had a discussion about the medical device. They wanted proof that it wasn't covered by insurance. This is a relatively new device and all the practitioners who prescribe it very clearly tell you, "Insurance does not cover it." But alas, the only thing this FSA will accept is for me to submit a claim to my insurance company and then forward them the denial record. OK, this will be a fun discussion with my insurance company.

I explain the problem to my insurance company and they seem happy to comply (I don't think they often get requests to deny a claim), but let's step back a minute -- this is *my* money in that FSA account. I have proof that I've paid for the device. I have a letter of medical necessity. No insurance provider in the land covers it and now we're going to waste my time, my insurance company's time reviewing and denying the claim and the FSA's company's time reviewing the claim and the denial. I understand that we have a serious unemployment problem in this country, but is the solution really to create busy work for as many people as possible? (I attest that I have no need for busy work!)

But wait, it gets better. I bother the original provider for the information I need to submit the claim and submit the claim. Fast forward two weeks later: I get a check for the medical device, but not the glasses!!!!! (Note that I have still not gotten the denial letter from my insurance company and have therefore not provided the FSA company the documentation they requested, but somehow they processed the claim.) OK, this is going to be good. I call the FSA company again (this time I get through to the right place quickly because I have a claim number). I shut my mouth up about the medical device and ask about the glasses. It seems that the receipt from Costco showing the date, the amount, etc., is not sufficient evidence that I actually paid for the glasses. They would like to see a copy of my bank statement showing the debit that paid for these glasses. Right -- Costco makes it a good business practice to give glasses away without charging people for them.

So, I faxed the bank statement off to them (where the debit included a charge for my son's glasses and contacts which I was not claiming, because I have already exceeded my account). I have yet to hear back, but I can hardly wait! OK, fast forward -- it's now approximately three weeks later and I've heard nothing. I try to call again. This time, even with claim number and reference number I end up in a series of phone calls and transfers all slightly different that get me to India once and Maryland Medicare twice. At this point I am getting so frustrated that my son in the other room is starting to worry about my sanity (as well he should) and whether I was about to get on a plain, fly to texas and take someone out. I was really not a happy camper. Finally, after shouting at phone hell claiming to have absolutely no information that they wanted (since giving them correct information resulted in my getting forward to health insurance provider issues in India) I spoke with a human being -- a calm reasonable human being named Ashley. They have no record of my having faxed the bank statement (of course!). So, she gives me a number that is in theory her direct fax line and I refax it; she agrees to call me back within 24 hours. Anyone want to put money on how this gets resolved??? (Note that I have by now wasted for more time than the stupid $125, but I still refuse to let it go, since it's just wrong, wrong, wrong that they will not give me my money.)

In case you think that's the end of FSA hell for 2011, wait, there's more! Remember, this was all about the mid-year discovery of the second FSA. What about my main FSA? Certainly there should be no problem there, because I've been dealing with this company for about 19 years and have this down to a science, right? Hah! You are so trusting. Would I be blogging if that were the case?

So, in 2008 we discovered that one of my kids has food sensitivities -- bad ones. It turns out that you can reimburse yourself for special food purchased in such situations (who knew). So, with the same FSA, I've been carefully collecting grocery receipts, annotating them, and submitting for reimbursement. (Yes, I can tell you precisely how much I've spent on gluten-free, casein-free products in the last three years.) I repeated the drill this year. This year I get a denial letter indicating that they want to see the prescription for over the counter medication!? OK, I did not submit $1500 worth of claims for OTC medication, so I have to assume this is the GF/CF food. Once again I get on the phone. Sure enough, they'd like to see a prescription for the food. I point out that they have been reimbursing me for the past three years and that they have in their hands, the original letter from his gastroenterologist, documenting his condition and the need for a GF/CF diet. They want a new letter. OK, he doesn't see the gastro guy any more since when he's on a GF/CF diet he's healthy and doesn't need a doctor. You might think that this is a good thing and that scheduling needless appointments with specialists might be considered a bad thing. But wait -- his annual physical carefully reports his food sensitivities -- is that sufficient? No, even though the physical documents that he has sensitivities, it does not explicitly state that he must be on a gluten-free casein-free diet. Once again, let's think about what's going on here -- we have a persistent, documented medical condition. We've got a letter from the specialist explaining that the treatment for the condition is to avoid the irritants (duh), and now we're going to make work again for some doctor or set of doctors to produce another letter explaining that a person with gluten and casein sensitivities must not eat gluten and casein. I can hardly wait to have the conversation with our pediatrician explaining that we need this letter. Actually, she was most accommodating and I even have my letter for 2012 in my hot little hands. Let's see if the FAS pays me back now!

So what's the big picture? We have medical costs skyrocketing out of control and we have enormous beauracracies in place making it as difficult as humanly possible to actually get things done. Who's shocked?

7 comments:

  1. I for one am certainly not shocked. I know this story all too well.

    For what it's worth, my algorithm for my FSA is to come up with a minimum amount that I expect to pay and just go with that. For instance, I know I will have at least $100 in prescription copays and $25 in doctor copays per month, so I can safely put over $1000 in my FSA. I also have a FSA card through ConnectYourCare or something that lets me pay for FSA-eligible expenses exactly as if it were a debit card -- no reimbursement requests or receipts necessary. I haven't had any problems with it.

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  2. I'm not surprised, either. Based on your stories, and what I've heard from other folks, it seems that the system is primarily concerned with making sure you can't cheat and spend pre-tax dollars on unauthorized stuff. Efficiently paying valid claims is secondary.

    Does insurance cover the medical device? They want to know because somebody is worried you'll file for FSA reimbursement *and* file a claim with your insurer. GF/CF food? Maybe your kid is completely recovered, but you think you can feed the family cheaper by buying GF/CF food via the FSA. etc.

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  3. I use the online services to submit claims based on scanned receipts. If they deny me, I resubmit. If they still deny me, I open a trouble ticket. If that's not resolved to my satisfaction, I submit again, then rinse and repeat. Make them work as a penalty for obstruction!

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  4. The FSA is a marvel. Somehow, we were able to create a medical benefit that is more valuable to the well paid executives and professionals than to the more poorly paid hourly employees. Which of these two groups needs more support? What value is a FSA to an hourly call center worker who has a very low marginal tax rate?

    At a personal level, my biggest gripe about the whole system is that you need to predict your expenses. In January 2011, I felt awful and went in to see a doctor, only to end up in intensive care with a diagnosis of kidney failure. So, I had easily blown through my estimated year spending by mid February. Had the very same events happen a month earlier, I could have maxed out my FSA contribution.

    By contrast, this year I became eligible, due to end state renal disease, for Medicare, but only AFTER I had completed the transplant (about $400K). So now, between insurance and Medicare, I can have health care at no marginal (out-of-pocket) cost.

    I also have a daughter who will need her wisdom teeth out, so we set aside money for that. But she got a scholarship to study in France, so she was not able to get the teeth extracted this year. We will still plan on the procedure, but we can't do it in calendar year 2012.

    So, when I needed more money, I could not increase my FSA contribution. When I have too much money, I will end up loosing it. (Except that enrolling in Medicare is a qualifying event that allows me to alter the deductions for 30 days, but that is just another example of the arbitrary nature of this law.)

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  5. Wow. Well explained and I found your suggestions really attractive and more pleasing to the eyes. Thank you for sharing and more power!Insurance

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  6. My algorithm is not to use FSAs because they are more trouble than they're worth. I hate the fact that you can't roll the money over to the next year---what a stupid system!

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