Tuesday, October 18, 2005


Heath Care for our ERA

I’m signing up for the Employee Reimbursement Account or “ERA,” a fringe benefit offered through my employer that’s considered part of the health care plan. ERA is essentially a tax credit for uninsured medical expenses. It’s managed as a payroll deduction: you set aside any amount you choose of pre-tax salary up to $7,500, which goes to the IRS. At the end of the tax year, you submit your uninsured medical bills to the IRS, which sends you a reimbursement out of your “account.”

So like a tax credit, the benefit is a kind of discount or subsidy: because you pay your medical bills with untaxed salary, you realize a tax savings of about 1/3 off your medical bills, whatever taxes you would have paid on that ERA money you set aside had it been paid to you as regular salary.

Here’s the down side: the money you set aside is “use it or lose it.” If you designate $2,000 of your salary for the ERA but have only $1,000 of uninsured medical expenses for the year, the IRS reimburses your $1,000 of expenses and the U.S. Treasury pockets the other $1,000 of your (pre-tax) salary. So basically, you’re being asked to engage in a little off-track betting with your health. “How much money will I run up in medical bills this year?” If you guess high, you lose. If, like me, you play it safe and guess low, you end up getting ERA reimbursement for only a fraction of your medical bills.

The program offsets the guesswork a bit by taking a liberal, eclectic view of what counts as a medical expense. (E.g., therapeutic massages.*) But it’s still very difficult to know how much you’ll have by way of medical expenses.

Ultimately, ERA is a maddeningly stingy, idiotic excuse for a national health care policy. It represents the worst of Clinton-era policymaking: i.e., a Republic policy that Clinton embraced for the simple reason that he could sell it. Not only is it the standard Republican band-aid posing as a cure-all for policy ills – a smallish tax credit – but it its dominant quality is giving with one hand and taking back with the other.

Every year I sign up for ERA, and I think about how I have to gamble by choosing the ERA amount, and I think about what a genuine national health care policy would look like, I want to vomit – and then see if I could put in for ERA reimbursement for the cleaning bill.

*See comments.

It's really only good for the things you know are coming down the pike, like braces for the kid, or eyeglasses that you know will replace in the coming year. And our orthodontist was very willing to wait 3 months for payment, until the beginning of the year, when our account "refreshed".

I wish I knew about the massage thing when I still had the option for the HCRA (health care reimbursement account), our local acronym for that. I would have had a lot less tension in my shoulders.

The one thing you neglected to mention is that you can take the money out of the account BEFORE you actually pay it in. That's why my orthodontist was so agreeable. If he waited till January, he could be paid in full, otherwise, he'd be getting his monthly percentage of the total bill spread out over the entire year. Downside of that is if you lose your job before you've filled up the account - you have to pay it off somehow (usually with your last paycheck).
Damn straight, Oscar.

Of course, the Republicans Still Suck Way Worse angle is that their policy is to make health savings accounts pretty much the whole deal.
The medical reimbursement ERA is a racket. It's nearly impossible to predict how much one will spend on unreimbursed medical bills (unless you have some sort of ongoing medical condition or can postpone your medical treatment, like braces, until the next year). The other problem is that every Nov-Dec there is a mad rush to spend down the money in the account or the government gets to keep it. What the hell! That doesn't make any sense at all to me. I ended up spending over $200 on contact solution last year and still there was money left over in my account.
Sort of like investing in the stock market these days.
In the original post, I wrote "therapeutic messages." No one called me on it, and I don't know what a therapeutic message would be -- maybe if I paid someone to say, "You not an idiot just because you make stupid spelling mistakes on your blog," and if that made me feel better, perhaps I could get reimbursed for the payment.
"You not an idiot." It's getting worse...
Actually, I was going to call you on the therapeutic massages, for a different reason. My plan at work lists massage therapy as an ineligible expense, except where medically prescribed. I think/thought our company was just following IRS rules, which have gotten more lax in recent years allowing, as one commenter notes, people who overbudgeted to stock up on drug store supplies used for medical needs.
But maybe your plan is better than ours and massage therapy is covered under yours. Still, I'd check the IRS rules, anybody who is planning to put massage expenses into their untaxed "bank."

Also, no one mentioned that this "health care plan" is relevant only to middle and upper classes, really. How many lower class people budget money to be taken out from their checks for medical expenses, even temporarily and if it provides tax advantages? (Some need that money in the paycheck today.) Particularly unseen medical expenses, even if the main way of treating them might be with over-the-counter remedies is eligible. You gamble that you won't need to spend that money.
No, this policy is for the middle class ortho and dental bills, eyeglasses, and surgeries that can be planned in advance. Also, if you have the surgery in January, say laser eye, then leave in February before it's paid for, I think the company is out, even if they take your final paycheck.
You should consider a health savings account instead - if youre pretty healthy (i.e., you dont visit doctor too frequently), its a great deal. And you dont run into the "gamble" problems you mentioned as its portable and carries over year to year. I'd be happy to give you more information, but it may be best to research the wealth of info at www.hsainsider.com
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All I can say is WOW! The other half and I just got back from our friends house (well her friends house) and I needed a huge break. I am working on a project right now that is based on massage therapy training. I have literally been on-line for 2-3 hours doing research. Even though your blog really isn�t on the same page as massage therapy training I am certainly glad I came across your blog. There are a ton of great view points on this blog. Well I think I can here the kids screaming in the background. I put you in my internet favorites and I will certainly come back and visit. If you want to take a peek at my site you can find me here at http://www.massage-therapy-information.com. I update my site very frequently. Again, great job blogging and I will be back again soon!
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