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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Health claim administration costs

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: Do all Health Reimbursement Arrangements (HRA) plans require independent claim administration? I want my small business to avoid this cost if I can.

A: No; independent third party claim administration is required by IRS only if the plan covers uninsured expenses. If the plan covers only health insurance premiums and policy deductibles and co-payments, then no third party claim validation report is required. The employer can rely on a "claims applied to deductible" report as the basis of reimbursement. Alternately, you could cover uninsured claims but reimburse them only at the end of the year so that only one third party claim validation report is required. This would keep your expenses to a minimum. Freedom Benefits offers third party claim validation report for a flat fee of $150 which includes electronic reporting of claims. This is substantially lower than many other services. Assuming that you pay wage taxes on a quarterly basis on Form 941, the report should be prepared in the same quarter as you reimburse the expenses.


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