Experts predict that medical costs will continue to trend up in 2020.
Employers are fighting back, however. Increasingly, employers are seeking new and alternative ways to help employees access care as inexpensively as possible.
Tax-free medical expense reimbursements top the list of preferred methods. But many employees aren't sure how to handle such reimbursements. Keep reading now to learn how you can handle the reimbursement of medical expenses easily and efficiently.
What Are Medical Expense Reimbursements?
A medical expense reimbursement plan (MERP) is a specific type of health care plan. Employers may offer MERPs alone or in conjunction with other types of health care insurance plans.
Under medical expense reimbursement plan rules:
- Employees can set up a tax-free account.
- They can then divert pre-tax dollars from their paychecks into that account.
- When they buy qualifying medical supplies or services, they can apply to be reimbursed for those expenses out of the tax-free account.
This system enables employees to spend pre-tax money on medical necessities. Used correctly, it can save families huge amounts of money over time. According to some estimates, families can save more than $100,000 over twenty years using a MERP!
You can estimate how much you might save with such a plan using a free online calculator.
Types of Medical Expense Reimbursement Plans
There are several types of medical expense reimbursement plans. These include:
- Health Reimbursement Arrangements (HRAs)
- Health Savings Accounts (HSAs)
- Healthcare Reimbursement Plans (HRPs)
- Health Flexible Spending Accounts (FSAs).
Each type of plan works slightly differently. It is important to carefully review the rules of your specific plan upon signup.
Contribution Caps
Generally speaking, there are limits to how much money you can contribute to your MERP each year. For example, most individuals can invest up to $3,400 annually. Families can set aside up to $6,750 each year.
Planholders over 55 years of age may be entitled to save slightly more each year.
What Expenses Qualify for Reimbursement?
Unfortunately, not all products and services that might benefit your health will qualify for reimbursement. Under the rules for medical expense reimbursement plans in 2018, 2019, and 2020, employees can be reimbursed for:
- Acupuncture
- Treatment for alcoholism and other substance abuse conditions
- Ambulance or medical transportation services
- Prosthetics, including dental prosthetics
- Band-aids and other bandages
- Prescriptions, including birth control
- Medical screenings and tests
- Chiropractic care
- Lactation supplies
- Construction or device installation at home needed to facilitate the safe housing of a person with disabilities
- Eye and vision care and supplies
- Hospital stays
- Surgery and related expenses
- Long-term care services
- Fertility treatments
- Diabetes supplies
- Hearing aids
- Service animals
- Nursing services
- Insurance premiums
- Dental care
- Medically-related legal fees
- Psychiatric care
- Medically-related lodging expenses
- Durable medical equipment
Supplies may be purchased online or in person.
Qualifying Persons
You can request medical expense reimbursements for qualifying expenditures made on behalf of yourself and other covered family members. Typically, this includes your:
- Spouse
- Children (natural or adopted)
- Other legally recognized dependents
Medical Expense Reimbursement Plan Samples
As an example, imagine a woman named Brenda with diabetes. Brenda enrolls in a MERP and begins saving pre-tax money toward her expenses. In a given month, Brenda:
- Sees her doctor for a routine check-up
- Purchases a gym membership to help her stay active and keep her blood sugar under control
- Buys glucose test strips to track her blood sugar
- Fills two prescriptions
- Buys diabetic-friendly prepared meals from her local grocer
Under medical expense reimbursement plan rules, Brenda can apply for reimbursement for three of these five expenses. Her gym membership and meals will not qualify for reimbursement.
Setting up a System
Most families using a medical expense reimbursement plan find it easiest to set up a simple system to track their expenses throughout the year. With such a system in place, it takes only minutes each month to keep your account organized.
This ensures that plan holders can be quickly and easily reimbursed for their expenses. It also simplifies yearly taxes.
To set up this type of system for yourself, use these simple tips and tricks.
Simplify Your Purchasing
Many plan holders find it easiest to stock their first aid kids with regular bulk purchases from reliable online providers. This serves several purposes.
First, it ensures that you won't run out of supplies at inopportune times. Second, it allows you to secure great pricing without worrying about watching for local sales. Third, it reduces the number of receipts you need to keep, track, and submit.
Online purchases typically provide easy-to-read receipts that are printable and savable. This makes submitting your reimbursement requests quick and easy.
Schedule It
Pick a regular time in your schedule to submit your requests for reimbursement of medical expenses. For example, maybe you decide to do it on the first Monday of every month. Having a regularly scheduled time allows you to plan ahead and make it a habit.
Moreover, consistently applying for reimbursement keeps the number of receipts you need to handle each time to a minimum.
File It
Make a note on your receipts of the date you applied for reimbursement. When you receive your reimbursement, note it on that month's batch of receipts and file them. This takes only seconds to do but keeps your files neat and easy to reference.
It will make taxes and audits easy, too.
Handling Medical Expense Reimbursements Like a Pro
Handling medical expense reimbursements like a pro is easier than you might think. Set yourself up for success today by setting up an account to buy your home medical supplies online. With your purchasing simplified, you'll be well on your way to easy savings!
