Wednesday, June 13, 2007

Sometimes it's WHAT you know...

Recently, a client called to complain about a rate increase [ed: there's a first time for everything!]; his plan was barely 5 months old, yet his rate was going up on July 1st. I reminded him that we had upgraded his previous coverage in February, from a generic co-pay plan to an HSA-compliant high deductible plan. We hadn't changed carriers to do this, so his renewal date, which happened to be July 1, didn't change. Thus, his scheduled rate increase would take effect on July 1.
In the course of our conversation, he also complained about how the HSA itself was doing; he had chosen to use his credit union as his loss fund administrator, and they had "disallowed" his over the counter (OTC) meds. One of the selling points of HSA plans is the ability to run these items through the account, and thus garner some tax breaks. He had purchased cough medicine and other necessities, and the CU had informed him that these were "no-no's" for an HSA.
Now, I knew that these expenses were "kosher," but the CU had referred my client to IRS form 502, which does, indeed, disallow them. But 502 is not the operative form here, 213(d) is.
Okay, let's step back a bit: although they're often conflated, "tax-deductible" is not the same as "pre-tax." That is, a deductible item comes off at the end of the year, when one files one's 1040 (or whichever). A pre-tax item comes off immediately, so there's no waiting. The point is, some medical items are "deductible," if one itemizes, and one's unreimbursed medical expenses exceed 7.5% of one's Adjusted Gross Income. I'm not an accountant, so I'll stop there.
In the event, the CU admin folks were referencing the wrong list in determining eligible items to reimburse. I knew that, but couldn't for the life of me find my copy of the correct, relevant list, the aforementioned 213(d). One would think that it would be all over the web, but that's not the case. Finally, a very nice lady at one of my carriers forwarded a copy to me, and I've made it available here.
HSA plans are insurance, and I sell those. But HSA loss fund accounts are not: they're money, and I don't sell them. I do keep a list of HSA resources, most of which come from my clients (who are kind enough to share their experiences with me). I don't know why this particular client chose his CU, but you can be sure that it won't be on my list.
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