Flex Benefits News Flash ®
CLAIMS SUBSTANTIATION REQUIREMENTS FOR DEBIT CARD USE
Effective January 1, 2004
The IRS has passed regulations (2003-43) allowing for the reimbursement of eligible medical expenses using a debit card.
Although this is very good news, the IRS was quite specific in their guidance on how claims must be substantiated when using
a debit card. MGIS has prepared the following explanations and procedures on how to properly substantiate all Flexible
Spending Plan (FSA) claims.
Effective January 1, 2004, MGIS will request documentation (itemized receipts, itemized bills, EOBs, etc.) for ALL expenses
purchased with the debit card. IRS regulations state that TPAs can no longer use a sampling approach for claim adjudication.
Therefore, MGIS must review every claim. Please inform your employees of the importance of retaining all receipts for
expenses purchased with the debit card. Please also see our ‘Substantiation Solutions’ below.
In the event that an employee improperly uses the card, the following steps will be taken to ensure that the plan remains
compliant with IRS regulations:
1. MGIS temporarily deactivates the card, and asks the employee to repay the plan for any ineligible charges.
2. Should an employee submit additional claims, MGIS will use these claims (if eligible) to offset the money owed to the plan.
3. If MGIS is unsuccessful in our attempts (3) to collect the funds, we will advise the Employer/Plan Sponsor to withhold the
ineligible amount from the participant’s wages. Once this step has been taken, the participant’s card will be reactivated and
their balance adjusted to account for the repayment.
4. If MGIS is unsuccessful in requesting the repayment from a terminated employee, the employer must adjust the
employee’s W2 statement to reflect the ineligible amount as taxable income.
Please note that IRS regulations clearly state that when the card is used improperly, and the
TPA completes their consistent process (listed above), the Employee is liable.
Substantiation Solutions – Pharmacy Benefit Managers (PBMs)
The IRS allows for auto adjudication of certain Flexible Spending Plan claims, which can eliminate or significantly reduce the
documentation associated with substantiating an expense. Auto adjudication options include:
Co-pay Matching: by providing your company’s schedule of benefits (during enrollment), MGIS can determine when an
expense matches a specific copay amount.
Identification of Recurring Expenses: MGIS can auto adjudicate expenses that recur for the same amount each month
(i.e. maintenance prescriptions).
PBM (Pharmacy Benefit Manager) Matching: If you are currently using a PBM with your group health plan, we also have
the capability to use retro matching with any cooperating PBM. This will enable us to substantiate the eligibility of a
prescription expense using a data feed from your PBM, rather than requesting documentation from the participant. If your
group health plan uses a PBM, or your health insurer utilizes a PBM, see the attached listing of contracted PBMs.
If your PBM is listed, or if you work with a PBM not listed, please contact Sharron Error (ext. 116) or Marsha
Maresca (ext. 140) about utilizing your PBM for FSA administration.
Reminder - Over-the-Counter Medications Eligible for Reimbursement!
As you may be aware, the IRS passed a revenue ruling allowing for the reimbursement of over-the-counter drugs and
medications. We feel that this ruling will increase employee FSA participation significantly. Your employees can use the debit
card to purchase both prescription and over-the-counter medications! Please keep in mind that although the debit card is an
excellent tool for payment of eligible medical expenses, all purchases made with or without the card must be substantiated in
accordance with IRS regulations. For a complete listing of eligible expenses, please visit our website (www.We-R-
Should you have any questions regarding your Flex Benefits plan, you may log on to our website www.we-r-flex.com or you may call 1-866-WE-R-FLEX
(937-3539), (Dial 1) to speak with a customer service representative. We appreciate your continued support of the MGIS Flex Convenience card.
F-BB-05_101403 Medical Group Insurance Services, Inc.