These days, you don’t have to lose sleep over sky-high medical bills.
Many financial products are available to help you manage medical debt — such as medical credit cards and medical loans. Medical reimbursement is yet another tool you can use to keep your finances on track.
What is medical reimbursement?
Medical reimbursement often takes the form of medical expense reimbursement plans (MERPs), which are employer-funded, IRS-approved, tax-free reimbursement arrangements that, as their name suggests, cover medical expenses.
In short, through a MERP, your employer will reimburse you for medical expenses you or your dependents pay out of pocket for, as long as you follow your employer’s reporting procedures.
How does medical reimbursement work?
First, your employer decides a monthly reimbursement allowance for you—if your medical expenses exceed your reimbursement allowance, you’ll have to pay the difference yourself.
Second, every time you see a doctor, get a prescription, or go to the hospital, you have to submit proof that you paid for a medical expense, and your proof—receipts are usually fine—must contain expense date, description, and your name.
Pro tip! Get organized on your trips to see a doctor. Keep a booklet with you to record expenses, dates, the doctors you saw, and more. Copy information from your booklet into your personal budget sheet, if you have one, to help you track your health-care spending. And keep health-care receipts tucked away in your booklet or filed in your computer so that you can find them easily when your employer requests them.
Third, your employer will review your claim to make sure nothing is missing and that the expense(s) qualifies for reimbursement. And if they check all boxes, they’ll process your reimbursement!
What is covered?
Part of the reason why MERPs are so popular among employers and employees is that they cast a wide net of coverage over medical expenses. Most MERPs cover treatment and service costs of most specialized treatment areas, including vision care, mental health care, nursing home care, dental care and chiropractic care.
They also cover assistive care devices (such as crutches and hearing aids), lab procedures, and even some surgeries. To give yourself an idea of what MERPs typically cover, check out this comprehensive list of covered medical expenses in a MERP available to union members of the entertainment industry.
What plans are available?
Here are three of the most common ones:
Health reimbursement arrangements (HRAs)
HRAs are the standard MERP. Employers set monthly reimbursement allowances for employees to make health-care purchases, and employees have to submit proofs of purchase to their employers for reimbursement. These plans are tax-free for both employee and employer.
Health care reimbursement plans (HRPs)
HRPs work the same way HRAs do with a notable exception — employees can use these to seek reimbursement for private health insurance expenses, including premiums. More and more employers are moving to HRPs over group insurance plans because they’re easier to organize for employees and less expensive for employers.
Flexible spending accounts (FSAs)
FSAs are a little different. These are specialized tax-free savings accounts designed to cover medical expenses that both you and your employer can contribute to (employers don’t have to contribute, and some won’t). When you need access to the money you and your employer have saved, you must submit your claim, including proof of purchase, to the FSA through your employer. FSAs are similar to health savings accounts, which you can read more about in this article.
The bottom line
Talk to your employer to see whether they offer a MERP and to find out how to sign up for one if they do. Once you’re all set up with your plan, track each expense you incur every time you see your doctor or make a trip to the hospital. Finally, keep your receipts readily available to give your employer so they can process reimbursement.