Initial Business Response / [redacted] (1000, 5, 2015/10/21) */ Please see attached for a thorough response to the consumer's complaint Flex Compensation, Incresponse to Complaint file in Revdex.com CASE#: [redacted] Mr [redacted] indicates in his complaint that Flex Compensation "routinely blocks payments for legitimate use of FSA dollars..." Review of our records indicate that Mr [redacted] has had transactions since the beginning of the year through which his providers have been paid at the time of the transaction - no payments were blockedTen of the transaction were automatically substantiated with no need for badocumentation, but he did receive letters requesting bafor four of the transactionsHaving received no response within the required 30-day time-frame, we sent a reminder for each of the first two transactions Mr [redacted] also indicates that he submitted a receipt for the dental transaction in question, which is trueHowever, the documentation did not provide enough detail to verify the patient responsibility and validate therefore validate the debit card transactionAn overview of the documentation requirements follows, as well as samples of how the requirements are communicatedHighlights have been added IRS Regulations require that 100% of debit card transactions be substantiatedRevenue Ruling 2003-provides an outline of the requirements in one of the examples that it sets forth, and the Law and Analysis section of the ruling re-iterate those requirements "In conjunction with the health FSA and the HRA, Employer N permits electronic reimbursement of medical expenses through the use of a debit card or stored-value card ("card")Under the arrangement adopted by Employer N, each participating employee is issued a card and certifies upon enrollment in the health FSA and HRA and each plan year thereafter that the card will only be used for eligible medical care expenses, as defined in § 213(d), of the employee and the employee's spouse and dependentsThe employee also certifies that any expense paid with the card has not been reimbursed and that the employee will not seek reimbursement under any other plan covering health benefitsAn employee-cardholder understands that the certification, which is printed on the back of the card, is reaffirmed each time the card is usedThe cardholder also agrees to acquire and retain sufficient documentation for any expense paid with the card, including invoices and receipts where appropriateThe card is automatically cancelled at termination of employment The cardholder's use of the card is limited to the maximum dollar amount of coverage available in the cardholder's health FSA or HRAAs described below, the card is ineffective except at those merchants and service providers authorized by Employer N, so that the use of the card at other merchants or service providers would be rejectedEmployer N limits the card's use to specified Merchant Codes relating to health careThus, the card's use is limited to physicians, pharmacies, dentists, vision care offices, hospitals, and other medical care providersWhen a cardholder uses the card at the point-of-sale, the merchant or service provider is paid the full amount of the charge (assuming there is sufficient coverage available in the health FSA or HRA), and the cardholder's maximum available coverage remaining is reduced by that amount To provide assurance that only eligible medical expenses are reimbursed, Employer N has established, in the health FSA and HRA documents, the following procedures for substantiating claimed medical expenses after the use of the card First, if the dollar amount of the transaction at a health care provider equals the dollar amount of the copayment for that service under the major medical plan of the specific employee-cardholder, the charge is fully substantiated without the need for submission of a receipt or further reviewFor example, Employee A is enrolled in a major medical plan with a $physician's office visit copaymentWhen Employee A uses the card to satisfy the copayment requirement, the system matches the amount of the transaction, $15, with the copayment under Employee A's coverage and the fact that the transaction is at a physician's office Second, Employer N permits automatic reimbursement, without further review, of recurring expenses that match expenses previously approved as to amount, provider, and time period (e.g., for an employee who refills a prescription drug on a regular basis at the same provider for the same amount) Third, if the merchant, service provider, or other independent third-party (e.g., Pharmacy Benefit Manager), at the time and point of sale, provides information to verify to Employer N (including electronically by e-mail, the internet, intranet, or telephone) that the charge is for a medical expense, the charge is fully substantiated without the need for submission of a receipt or further review (i.e., "real-time substantiation")For example, Employee A fills a prescription at a pharmacyThe Pharmacy Benefit Manager under Employee A's major medical coverage provides information that $of the cost of the prescription is a medical expense that is not covered by the major medical coverageBecause the information about the medical expense, $37.85, matches the amount of the transaction, the transaction is substantiatedThe transaction would also be fully substantiated where, for example, treatment at a physician's office results in charges in addition to the copayment and, after obtaining authorization for the card, the provider is prompted to enter treatment codes and chargesThe additional third-party information regarding the type of care, date of service, and amount provides substantiation of the expense without the need for further review Employer N's procedures provide that all charges to the card, other than copayments, recurring expenses, and real-time substantiation as described above, are treated as conditional pending confirmation of the chargeThus, Employer N requires that additional third-party information, such as merchant or service provider receipts, describing (1) the service or product, (2) the date of the service or sale and, (3) the amount, be submitted for review and substantiation..." From the Law and Analysis section: "Only amounts that are paid specifically to reimburse eligible medical care expenses as defined in § 213(d) receive tax-favored treatmentTherefore, to provide certainty that a particular expense is for medical care within the meaning of § 213(d), all claims for expense reimbursements must be substantiatedHowever, § 105(b) does not specify the method of substantiationThe procedures adopted by Employer N in Situation with respect to the electronic reimbursement of medical expenses meet the requirements of § 105(b)First, Employer N requires a certification upon enrollment and a reaffirmation upon each use of the card, as printed on the back, that the card will only be used for eligible medical care expensesSecond, reimbursements for medical expenses are processed only if they originate with certain vendors having health care related Merchant CodesThird, Employer N's procedures provide that every claim is reviewed and substantiated, either automatically without additional documentation or manually through the submission of merchant or service provider receiptsFourth, Employer N has adopted meaningful correction procedures for claims that are subsequently identified as impermissibleThese procedures meet the requirements of § 105(b)..." These requirements are communicated to participants a number of ways throughout the course of each plan year: **From Page of the Allina Flexible Benefit Program Summary Plan Description, dated January 1, 2015: "You are not required to submit a claim for reimbursement when you use your Benny CardHowever, you may be requested to provide supporting itemized documentation at a later dateIt is important to keep your receipts and other supporting documentation If you fail to submit supporting itemized documentation upon request, the expense will be treated as ineligible and you will be required to reimburse the ProgramIf you fail to reimburse the Program, appropriate action will be taken, including but not limited to: cancellation of your Benny Card; reduction of subsequent eligible claims; disallowing enrollment in future plan years; and any other method available by law." **From the cover letter that is sent at the beginning of a new plan year confirming a participant's election for that year "THE BENNY(r) CARD If you are a new health care account participant, you will receive two Benny(r) Cards in the mail shortlyIf you are a previous participant, continue to use the cards you already havePlease note: You can't use the Benny(r) Card for the dependent care account You should KEEP ALL DOCUMENTATION for each Benny(r) Card transactionWhile many claims may be automatically substantiated, IRS regulations require that FCI request badocumentation for other transactions to verify that the expense is eligible You SHOULD NOT use your Benny(r) Card in a new plan year to pay for a service that was received or an item that was ordered in a prior plan year Additional helpful information on using your Benny(r) Card can be found in the Benny Q&A under the Tools & Support tab on the web siteWe encourage you to carefully review this document." **From the Benny A/Q that is referenced above and available on the website: "DOCUMENTATION REQUIREMENTS IRS rules and regulations that govern the spending accounts and debit cards dictate that ALL transactions must be verified in order to be considered eligibleWe understand that it can be frustrating to have to submit documentation after you've used your Benny(r) card, but the regulations are clear that it is your responsibility to be able to substantiate all transactionsTherefore, save ALL documentation in case you need to provide it later To make the card as convenient as possible, we have worked with Allina Health to implement as many auto-substantiation methods as possible to reduce the number of request letters that must be sentSee Q.9, Q.10, Q.11, Qand Qfor additional information on documentation." and "QShould I save my receipts and other documentation for Benny(r) Card transactions? YESThe IRS regulations that govern the spending accounts and debit cards state that you must be able to provide itemized, third-party documentation for ALL expensesThere are four ways that a transaction can be automatically verified without any additional documentation (See Q.9), but you should still save all documentation in case you receive a request from FCI or in case you're ever audited by the IRS." and "QWhat is acceptable documentation? IRS regulations that govern the spending accounts require that documentation must be from an independent third party and must contain specific information; we must be able to determine what portion of the cost is patient responsibilityAn Explanation of Benefits (EOB) from your insurance company is most often the best type of documentation because it includes the necessary information If you are unable to submit the EOB, submit an itemized statement from the provider that includes: - Date of service (not date paid) - Detailed description of service - Patient name - Amount of expense; indication that payment is a co-pay - Provider name - Insurance payment, if applicable (not an estimate) The most common documentation problems are: - Cash Register / Credit Card Receipts - typically only provide the date on which you made payment and do not include the actual date of service or an adequate description of the item purchased or service renderedCash register receipts may be acceptable for eligible OTC items; the receipts MUST show actual name of the item"OTC special" or "OTC taxable" is not a specific enough description) - Balance Forward / Payment on Account - typically does not have enough information about the date or type of service in order to substantiate the expense - Insurance Pending / Insurance Estimate - if insurance is pending or is an estimated amount, we will need to see the Explanation of Benefits or itemized statement from the doctor or dentist that includes the final patient responsibility amount after the insurance processes the claim." For the particular transaction that is still outstanding, the first piece of documentation showed a partial payment on account, for which we requested detailed insurance payment information; Mr [redacted] then submitted a print-out from his dental carrier that shows a summary of the anticipated insurance payment but does not include detail about actual payment or member liabilityWe recently sent a letter with the following: "Comment: The statement sent was only a summary of insurance paymentPlease provide the actual EOB showing what the patient responsibility is or else please provide an itemized patient ledger showing all insurance payments and adjustmentsThank you." Finally, Mr [redacted] indicates that "This company has a vested interested in denying my claims, money I don't use for the year goes into their pockets." While his "claim" (debit card transaction) is still pending additional information, no money has been collected back from his provider (nor will it be unless he requests that funds be credited back to his account)If the transaction - or any part of it - does end up being ineligible and he sends in a repayment, that amount will be applied back to his account and will be available for other eligible expensesSimilarly, any money that he does not use he forfeits, but that money remains with his employer to offset the cost of offering the plan - it does not transfer to or become the property of the claims administrator Initial Consumer Rebuttal / [redacted] (3000, 7, 2015/10/27) */ (The consumer indicated he/she DID NOT accept the response from the business.) The company hides behind the fine print when you sign up for the card to justify trying to block a high percentage of transactions using the Benny CardThey say it is because of IRS rules, I would like to see the statistics of how often Flex Compensation is auditedMy recommendation is that no company should use Flex Compensation for their FSA needs
Initial Business Response / [redacted] (1000, 5, 2015/10/21) */ Please see attached for a thorough response to the consumer's complaint Flex Compensation, Incresponse to Complaint file in Revdex.com CASE#: [redacted] Mr [redacted] indicates in his complaint that Flex Compensation "routinely blocks payments for legitimate use of FSA dollars..." Review of our records indicate that Mr [redacted] has had transactions since the beginning of the year through which his providers have been paid at the time of the transaction - no payments were blockedTen of the transaction were automatically substantiated with no need for badocumentation, but he did receive letters requesting bafor four of the transactionsHaving received no response within the required 30-day time-frame, we sent a reminder for each of the first two transactions Mr [redacted] also indicates that he submitted a receipt for the dental transaction in question, which is trueHowever, the documentation did not provide enough detail to verify the patient responsibility and validate therefore validate the debit card transactionAn overview of the documentation requirements follows, as well as samples of how the requirements are communicatedHighlights have been added IRS Regulations require that 100% of debit card transactions be substantiatedRevenue Ruling 2003-provides an outline of the requirements in one of the examples that it sets forth, and the Law and Analysis section of the ruling re-iterate those requirements "In conjunction with the health FSA and the HRA, Employer N permits electronic reimbursement of medical expenses through the use of a debit card or stored-value card ("card")Under the arrangement adopted by Employer N, each participating employee is issued a card and certifies upon enrollment in the health FSA and HRA and each plan year thereafter that the card will only be used for eligible medical care expenses, as defined in § 213(d), of the employee and the employee's spouse and dependentsThe employee also certifies that any expense paid with the card has not been reimbursed and that the employee will not seek reimbursement under any other plan covering health benefitsAn employee-cardholder understands that the certification, which is printed on the back of the card, is reaffirmed each time the card is usedThe cardholder also agrees to acquire and retain sufficient documentation for any expense paid with the card, including invoices and receipts where appropriateThe card is automatically cancelled at termination of employment The cardholder's use of the card is limited to the maximum dollar amount of coverage available in the cardholder's health FSA or HRAAs described below, the card is ineffective except at those merchants and service providers authorized by Employer N, so that the use of the card at other merchants or service providers would be rejectedEmployer N limits the card's use to specified Merchant Codes relating to health careThus, the card's use is limited to physicians, pharmacies, dentists, vision care offices, hospitals, and other medical care providersWhen a cardholder uses the card at the point-of-sale, the merchant or service provider is paid the full amount of the charge (assuming there is sufficient coverage available in the health FSA or HRA), and the cardholder's maximum available coverage remaining is reduced by that amount To provide assurance that only eligible medical expenses are reimbursed, Employer N has established, in the health FSA and HRA documents, the following procedures for substantiating claimed medical expenses after the use of the card First, if the dollar amount of the transaction at a health care provider equals the dollar amount of the copayment for that service under the major medical plan of the specific employee-cardholder, the charge is fully substantiated without the need for submission of a receipt or further reviewFor example, Employee A is enrolled in a major medical plan with a $physician's office visit copaymentWhen Employee A uses the card to satisfy the copayment requirement, the system matches the amount of the transaction, $15, with the copayment under Employee A's coverage and the fact that the transaction is at a physician's office Second, Employer N permits automatic reimbursement, without further review, of recurring expenses that match expenses previously approved as to amount, provider, and time period (e.g., for an employee who refills a prescription drug on a regular basis at the same provider for the same amount) Third, if the merchant, service provider, or other independent third-party (e.g., Pharmacy Benefit Manager), at the time and point of sale, provides information to verify to Employer N (including electronically by e-mail, the internet, intranet, or telephone) that the charge is for a medical expense, the charge is fully substantiated without the need for submission of a receipt or further review (i.e., "real-time substantiation")For example, Employee A fills a prescription at a pharmacyThe Pharmacy Benefit Manager under Employee A's major medical coverage provides information that $of the cost of the prescription is a medical expense that is not covered by the major medical coverageBecause the information about the medical expense, $37.85, matches the amount of the transaction, the transaction is substantiatedThe transaction would also be fully substantiated where, for example, treatment at a physician's office results in charges in addition to the copayment and, after obtaining authorization for the card, the provider is prompted to enter treatment codes and chargesThe additional third-party information regarding the type of care, date of service, and amount provides substantiation of the expense without the need for further review Employer N's procedures provide that all charges to the card, other than copayments, recurring expenses, and real-time substantiation as described above, are treated as conditional pending confirmation of the chargeThus, Employer N requires that additional third-party information, such as merchant or service provider receipts, describing (1) the service or product, (2) the date of the service or sale and, (3) the amount, be submitted for review and substantiation..." From the Law and Analysis section: "Only amounts that are paid specifically to reimburse eligible medical care expenses as defined in § 213(d) receive tax-favored treatmentTherefore, to provide certainty that a particular expense is for medical care within the meaning of § 213(d), all claims for expense reimbursements must be substantiatedHowever, § 105(b) does not specify the method of substantiationThe procedures adopted by Employer N in Situation with respect to the electronic reimbursement of medical expenses meet the requirements of § 105(b)First, Employer N requires a certification upon enrollment and a reaffirmation upon each use of the card, as printed on the back, that the card will only be used for eligible medical care expensesSecond, reimbursements for medical expenses are processed only if they originate with certain vendors having health care related Merchant CodesThird, Employer N's procedures provide that every claim is reviewed and substantiated, either automatically without additional documentation or manually through the submission of merchant or service provider receiptsFourth, Employer N has adopted meaningful correction procedures for claims that are subsequently identified as impermissibleThese procedures meet the requirements of § 105(b)..." These requirements are communicated to participants a number of ways throughout the course of each plan year: **From Page of the Allina Flexible Benefit Program Summary Plan Description, dated January 1, 2015: "You are not required to submit a claim for reimbursement when you use your Benny CardHowever, you may be requested to provide supporting itemized documentation at a later dateIt is important to keep your receipts and other supporting documentation If you fail to submit supporting itemized documentation upon request, the expense will be treated as ineligible and you will be required to reimburse the ProgramIf you fail to reimburse the Program, appropriate action will be taken, including but not limited to: cancellation of your Benny Card; reduction of subsequent eligible claims; disallowing enrollment in future plan years; and any other method available by law." **From the cover letter that is sent at the beginning of a new plan year confirming a participant's election for that year "THE BENNY(r) CARD If you are a new health care account participant, you will receive two Benny(r) Cards in the mail shortlyIf you are a previous participant, continue to use the cards you already havePlease note: You can't use the Benny(r) Card for the dependent care account You should KEEP ALL DOCUMENTATION for each Benny(r) Card transactionWhile many claims may be automatically substantiated, IRS regulations require that FCI request badocumentation for other transactions to verify that the expense is eligible You SHOULD NOT use your Benny(r) Card in a new plan year to pay for a service that was received or an item that was ordered in a prior plan year Additional helpful information on using your Benny(r) Card can be found in the Benny Q&A under the Tools & Support tab on the web siteWe encourage you to carefully review this document." **From the Benny A/Q that is referenced above and available on the website: "DOCUMENTATION REQUIREMENTS IRS rules and regulations that govern the spending accounts and debit cards dictate that ALL transactions must be verified in order to be considered eligibleWe understand that it can be frustrating to have to submit documentation after you've used your Benny(r) card, but the regulations are clear that it is your responsibility to be able to substantiate all transactionsTherefore, save ALL documentation in case you need to provide it later To make the card as convenient as possible, we have worked with Allina Health to implement as many auto-substantiation methods as possible to reduce the number of request letters that must be sentSee Q.9, Q.10, Q.11, Qand Qfor additional information on documentation." and "QShould I save my receipts and other documentation for Benny(r) Card transactions? YESThe IRS regulations that govern the spending accounts and debit cards state that you must be able to provide itemized, third-party documentation for ALL expensesThere are four ways that a transaction can be automatically verified without any additional documentation (See Q.9), but you should still save all documentation in case you receive a request from FCI or in case you're ever audited by the IRS." and "QWhat is acceptable documentation? IRS regulations that govern the spending accounts require that documentation must be from an independent third party and must contain specific information; we must be able to determine what portion of the cost is patient responsibilityAn Explanation of Benefits (EOB) from your insurance company is most often the best type of documentation because it includes the necessary information If you are unable to submit the EOB, submit an itemized statement from the provider that includes: - Date of service (not date paid) - Detailed description of service - Patient name - Amount of expense; indication that payment is a co-pay - Provider name - Insurance payment, if applicable (not an estimate) The most common documentation problems are: - Cash Register / Credit Card Receipts - typically only provide the date on which you made payment and do not include the actual date of service or an adequate description of the item purchased or service renderedCash register receipts may be acceptable for eligible OTC items; the receipts MUST show actual name of the item"OTC special" or "OTC taxable" is not a specific enough description) - Balance Forward / Payment on Account - typically does not have enough information about the date or type of service in order to substantiate the expense - Insurance Pending / Insurance Estimate - if insurance is pending or is an estimated amount, we will need to see the Explanation of Benefits or itemized statement from the doctor or dentist that includes the final patient responsibility amount after the insurance processes the claim." For the particular transaction that is still outstanding, the first piece of documentation showed a partial payment on account, for which we requested detailed insurance payment information; Mr [redacted] then submitted a print-out from his dental carrier that shows a summary of the anticipated insurance payment but does not include detail about actual payment or member liabilityWe recently sent a letter with the following: "Comment: The statement sent was only a summary of insurance paymentPlease provide the actual EOB showing what the patient responsibility is or else please provide an itemized patient ledger showing all insurance payments and adjustmentsThank you." Finally, Mr [redacted] indicates that "This company has a vested interested in denying my claims, money I don't use for the year goes into their pockets." While his "claim" (debit card transaction) is still pending additional information, no money has been collected back from his provider (nor will it be unless he requests that funds be credited back to his account)If the transaction - or any part of it - does end up being ineligible and he sends in a repayment, that amount will be applied back to his account and will be available for other eligible expensesSimilarly, any money that he does not use he forfeits, but that money remains with his employer to offset the cost of offering the plan - it does not transfer to or become the property of the claims administrator Initial Consumer Rebuttal / [redacted] (3000, 7, 2015/10/27) */ (The consumer indicated he/she DID NOT accept the response from the business.) The company hides behind the fine print when you sign up for the card to justify trying to block a high percentage of transactions using the Benny CardThey say it is because of IRS rules, I would like to see the statistics of how often Flex Compensation is auditedMy recommendation is that no company should use Flex Compensation for their FSA needs