When you hear the term, “medical travel,” you might think of the person with a rare disease that must travel across states to see a specialist. But medical travel can take many forms and affect your employees in a multitude of ways.
Employees that live in an urban environment might be able to walk down the block to receive necessary medical treatment, but those that live in rural areas might need to drive over an hour. Employees whose dependents are diagnosed with a chronic condition or disease might need to travel to see a specialist. The cost of medical care is high, and when you add the cost of traveling for said care, it can seem insurmountable, even for employees that regularly need to pay for parking at a doctor’s office.
To help employees with the cost of medical treatment and care overall, consider helping them pay for medical travel. There are multiple ways to do this and in this post we’ll give you the basics of each and how Lively can help.
Medical travel benefits are growing in popularity. Offering them can help support employee retention, recruitment, and diversity, equity, and inclusion efforts. According to a recent report by Mercer, 44% of employers are or will be offering a benefit to assist with medical travel expenses in 2023. Offering medical travel benefits enables employers to offer a diverse benefits package with options for everyone’s unique healthcare needs. In addition, it helps employees take their health plan coverage further and maintains or extends access to services covered under your health plan.
Currently, there are four types of popular accounts and arrangements through which employers can help employees pay for medical travel: Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), Medical Travel Accounts (MTAs), and Medical Travel Health Reimbursement Arrangements (HRAs).
Healthcare FSAs are employer-sponsored, pre-tax accounts into which employers and employees can deposit money to pay for qualified medical expenses, including transportation for medical expenses. Employees and employers decide how much they’ll deposit for the plan year during open enrollment and then once the plan year starts, the entire annual amount is available to employees regardless of how much they’ve deposited into their account.
The IRS sets annual contribution limits for FSAs. Each FSA holder is subject to the same contribution limit regardless of whether they are on an individual or family health plan, but a spouse can contribute to a separate FSA through their employer and contribute up to the same annual max. Money contributed to Healthcare FSAs must be used within the plan year and any money left over is forfeited to the employer.
Healthcare FSAs are compatible with any type of health insurance plan as long as that health plan is employer-sponsored. Employees can’t sign up for their employer’s FSA and buy a health plan from the private marketplace.
HSAs are savings accounts into which employees, employers, family members and others can contribute pre-tax money to pay for qualified medical expenses. In order for employees to sign up for and contribute to an HSA, they must also be concurrently enrolled in a High Deductible Health Plan (HDHP). These health insurance plans have a minimum deductible and out-of-pocket maximum set each year by the IRS for individual and family plans.
If they decide to participate in the HDHP/HSA combination during open enrollment, employees and employers will decide how much they would like to contribute for the year, up to the annual maximum contribution limits set by the IRS, and those contributions will begin at the start of the plan year.
When paying for qualified medical expenses, employees can only use up to the remaining balance in their account. If an expense is larger than what remains, they will have to wait until more contributions are made in order to pay for or reimburse for said expense. Luckily, HSA balances roll over from year-to-year, enabling participants to build a nest egg for medical expenses.
Unlike FSAs, which are owned by employers, HSAs are owned by employees. That means employees never lose access to their account. Even if they leave their employer, are no longer covered by an HDHP or retire. Once an employee reaches age 65, their HSA functions as a typical retirement account with the exception that disbursements for qualified medical expenses remain tax-free.
MTAs are employer-sponsored employee assistance programs that are specifically designed to pay for medical travel. Only employers can contribute to these accounts and employees will be assessed income taxes for the reimbursements they receive. Since these are after-tax expected benefits, employers have much more flexibility and control over how the program is designed.
MTAs are employer-owned accounts and any unused contributions are reabsorbed by the employer at the end of the plan term. They are also compatible with any kind of health insurance plan and can be participated in while also participating in an FSA, HSA, or HRA.
Medical Travel HRAs are employer-sponsored accounts through which employees can reimburse for eligible transportation expenses not covered by a major medical plan. Employees may be required to pay income taxes on the expenses for which they’re reimbursed. Medical Travel HRAs have specific caps as well. Overall, they are capped at by the IRS at $1,950 per year, lodging expenses reimbursement is capped at $50.00 per night, and mileage reimbursement is capped at 22 cents per mile. They are also not compatible with an HSA. Employers choose how much they’ll contribute and at what cadence (monthly, quarterly or yearly). The IRS sets the verification requirements.
All of the above accounts can reimburse for medical travel expenses. Expense eligibility for FSAs, HSAs, and Medical Travel HRAs is governed by the IRS since these accounts are a pre-tax benefit. Expense eligibility for MTAs is governed by the individual companies that offer these accounts.
The types of expenses that are eligible for reimbursement are expenses for travel directly related to necessary medical care. For example, if an employee had to drive two hours to see a specialist and pay to park in their parking garage. They could be reimbursed for the mileage on their car, the cost to rent a car if they don’t own one and the parking fees. The travel could be directly related to medical care they need, or care that a spouse or dependent needs.
The following are considered eligible medical travel expenses:
When using their FSA for medical travel, employees may need to submit a doctor’s bill or note that the travel was medically necessary.
The following expenses would not be deemed eligible for reimbursement as a medical travel expense:
If you already offer your employees an FSA or HSA, that’s great! You’re providing a valuable and necessary benefit to your workforce. They can use these accounts to pay for qualified medical expenses, including medical travel, with savings that are tax-free.
If you offer an MTA alongside these important accounts, they can save their tax-free contributions to save and pay for larger medical expenses (or even retirement in the case of an HSA), while using their MTA to pay for travel. Plus, you only reimburse for the expenses they actually incur, reabsorbing whatever is left over.
If you’re interested in offering the best benefits package possible, reach out to Lively today. We have multiple tools to help you support your workforce while reigning in your health insurance budget. We have best-in-class design and customer support and will be your guide every step of the way from plan design and onboarding to administration and reporting.
