QUESTION: A few participants in our company’s health FSA told us that their doctors have started charging patients a monthly fee that is payable whether or not the patients visit the office. There is no additional charge for actual office visits. Can our health FSA reimburse this fee?
ANSWER: Generally, fees of this type are not reimbursable. In our view, such fees are like insurance because they are payable whether or not medical care is provided. Thus, they fall under the “no reimbursement of insurance premiums” rule that applies to health FSAs and should not be reimbursed. In a variation on this type of arrangement, patients receive preferential “extras” from their doctors in exchange for a fee (e.g., priority when scheduling appointments, 24-hour telephone access to the doctor, a special waiting room, etc.). Fees for these programs generally should not be reimbursed either, because the payments would not be for medical care. (For an expense to be reimbursable under a health FSA, it must be for “medical care” as defined in Code § 213(d)—additional requirements must also be met.) The same is true of a monthly fee that patients must pay in addition to any copays, deductibles, or other charges for office visits.
Note that there could be other variations of these programs under which some services might be reimbursable. For example, a fee might include payments that can be separately allocated to services that are for medical care. And health FSA administrators should not put too much stock in the particular name given to the fee (retainer fee, concierge fee, direct primary care, etc.), as these terms may mean different things for different providers. Consequently, it is important to determine exactly what services are involved before deciding whether to reimburse part of a fee—it may be necessary to ask the participant for additional substantiation. Where a fee relates solely to a specific rendered service (such as a copay) rather than being a retainer, part or all of it might qualify for reimbursement as an eligible medical care expense. For example, the preamble to proposed IRS regulations (see our Checkpoint article) suggests that payments for direct primary care arrangements typically would be viewed as payments for insurance. As such, health FSAs would be prohibited from reimbursing them. However, the preamble also states that payments for a direct primary care arrangement that provides solely for an annual physical exam or an “anticipated course of specified treatments of an identified condition” would not be treated as insurance. These types of payments could potentially be reimbursable.
For more information, see EBIA’s Cafeteria Plans manual at Sections XX.D (“Expenses Reimbursed Must Be for Medical Care”) and XX.H (“Health FSAs Cannot Reimburse Insurance Premiums”). You may also be interested in our recorded webinar “Learning the Ropes: An Introduction to Cafeteria Plan Design and Administration” (recorded 2/25/2021).
Contributing Editors: EBIA Staff.