Implementing a Medical Travel Benefit

Following the leaked draft opinion from the Supreme Court of the United States last week, a number of employers have asked about the best practices and considerations for implementing a medical travel reimbursement benefit for employees who find it necessary to access healthcare in another region.

Medical travel benefits to support or even incentivize care in other locations are not necessarily new. Beyond politics, some employers have already implemented programs to drive care towards centers of excellence for certain high-cost or complex conditions.
 

Taxation and Eligible Expenses

IRS Publication 502 defines medical care that is tax-deductible. For individuals, such expenses would only be tax-deductible to the extent they exceed 7.5% of Adjusted Gross Income (AGI). However, these definitions are also relied upon to define eligible medical care that can be provided on a tax-deductible basis through employer plans. The following types of medically-related travel expenses are considered eligible:
 
  1. Transportation: amounts paid for transportation to another city to receive medical treatment are eligible. The expenses must be primarily for, and essential to, receiving medical care. This includes:
     
    • Bus, taxi, train, or plane fares
    • Mileage reimbursement for driving a personally owned car
    • Car services, such as taxis, Uber, Lyft, or another similar rideshare service
    • Transportation expenses of a parent who must accompany a child who needs medical care
    • Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone. Note that expenses for a friend, family member, or other non-medically trained support person would not be eligible.

       
  2. Lodging: the cost of lodging while away from home receiving medical care if all of the following requirements are met:
     
    • The lodging is primarily for, and essential to, medical care.
    • The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital.
    • The lodging isn't lavish or extravagant under the circumstances.
    • There is no significant element of personal pleasure, recreation, or vacation in the travel away from home.

The maximum amount for lodging is $50 per person per night. For example, if a parent is traveling with a child, up to $100 per night would be considered as an eligible medical expense for lodging.

Note that you can include lodging for an eligible caregiver traveling with the person receiving the medical care; however, the same rules apply for defining an eligible travel partner as outlined above for transportation expenses.
 
  1. Car expenses: costs associated with driving to receive medically necessary treatment are eligible. The IRS authorizes a standard medical mileage rate on an annual basis. The rate for 2022 is $0.18 per mile. Parking fees and tolls are also eligible.
The IRS also authorizes a significantly more complex methodology that allows for actual expenses for operating your car for the medical treatment. This includes calculating the actual out-of-pocket costs, such as the cost of gas, oil, parking, and tolls when you use a car for medical reasons. Items such as depreciation, insurance, general repair, or maintenance expenses are not eligible. This method also requires detailed logging of all mileage and expenses. Therefore, most people elect to use the simple medical mileage rate.
 

Not Eligible Expenses

Excluded expenses include:
 
  1. Meals (other than meals provided through inpatient care)
  2. Childcare expenses/babysitting
  3. Extending an otherwise-medical trip for vacation or personal enjoyment
  4. Expenses for a caregiver or travel companion other than the following two cases:
    • A parent accompanying a child under age 18
    • A qualified caregiver who can administer medication (such as a nurse)
       

Strategy

There are two paths that employers can take when establishing a medical travel Health Reimbursement Account (HRA). The two options are outlined below along with the basic pros and cons for each method:

Option #1: Integrated HRA
An Integrated HRA is one that is integrated with the health plan. This type of medical travel benefit would be available to all employees and dependents who are enrolled on the employer’s medical plan.
 
  • Pro: Employers may elect any reimbursement maximum, with no limit.
  • Con: Only employees who are actively enrolled on the health plan may be provided the medical travel benefit. In addition, only dependents that are actively enrolled on the health plan would be eligible under the plan. 

Option #2: Standalone HRA (Excepted Benefit HRA, or EBHRA)
Alternatively, a Standalone HRA is one that may be offered to ALL employees, independent of whether they are covered under the employer’s group health plan.
 
  • Pro: Employers may offer the benefit to a wider set of employees and eligible dependents (including those who waive the employer’s group medical plan). There is no restriction that the employee and dependents be enrolled in their employer sponsored health plan.
  • Con: There is a maximum benefit of $1,800 per employee per year for this type of HRA (the standard EBHRA limit). Expenses for dependent would still be covered, but the maximum is capped at $1,800 per employee. 

Employers may wish to exclude emergency transportation from this plan benefit in order to funnel emergency transport services through the medical plan for cost management and claims processing expertise.

Employers may also wish to clarify that the medical travel expense reimbursement plan is available when seeking medical services that are not available within 100 miles of an employee’s home. While the impetus for many employers who may be considering launching a medical travel HRA at this time is the potential non-availability of abortion services, the benefit would typically be written to cover medical travel expenses for any procedure that was not available within a certain radius of the employee’s home.
 

A Few Thoughts About Reality

Just as our country is divided, employees hold strong beliefs on both sides of the underlying abortion issue. Our experience has been that employers are thoughtfully considering the importance of this issue and how it will impact their employees. 

What about cost? Some employers have jumped to offering a medical travel benefit without much regard for the potential cost, assuming benefits can be capped and will be low compared to other healthcare costs. Others have expressed concerns such as, “There are a lot of additional benefits we would like to offer our employees. Should we be investing those limited dollars in a medical travel benefit?” 

It is possible that for many employers who adopt a medical travel benefit, it may be largely symbolic. The reality that both stigma and confidentiality loom large under such a medical travel benefit cannot be ignored.
 

Next Steps

Vita is prepared to assist clients who wish to implement such plans by providing formal plan documentation and confidentially administering the Health Reimbursement Arrangement (HRA) on behalf of clients. Please reach out to your Vita account management team if you would like to further explore or implement this benefit.

If employers choose to administer the reimbursement internally, it is recommended that careful consideration be given to privacy and confidentiality concerns. In addition, employers should consult with a third-party administrator or legal counsel to draft formal plan documentation and create guidelines for acceptable documentation for reimbursement.

Lastly, Vita will monitor legislative activity to stay up to date on potential new restrictions to health care that is currently covered under medical plans. Should abortion or other reproductive services be restricted from reimbursement, employers who may wish to maintain such coverage can consider expanding the HRA to include direct reimbursement for those medical services as well.

 
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