My wife and I have always had health insurance. Back when the Affordable Care Act was passed, our catastrophic health insurance plan was grandfathered, and we have kept it since. We recently turned 60, and this is the first year we have ever received a reimbursement from our medical insurance.
On October 9, 2020, we filled a prescription at CVS Pharmacy. It cost $45.95, and we used our Health Savings Account (HSA) debit card to pay for it.
Because we had also independently hit our deductible, we sent in receipts to our insurance for reimbursement. A few months later, we received a letter from Anthem containing a reimbursement check for $27.57 (60% of the expense).
When you receive reimbursement for an expense you’ve already paid from the HSA, that portion of your HSA distribution is no longer a qualified medical expense. Distributions in excess of your qualified medical expenses are taxed and penalized on your tax return. Thus, to avoid taxes and penalties, such reimbursement needs to be recontributed to the HSA in a timely manner.
I use HSA Bank as my Health Savings Account. While there is no annual fee, the customer service is sometimes lacking.
HSA Bank did not have any documentation regarding how to put money back into the account on their website.
I called them, and they told me that I could simply make a deposit and put in the comments section that it was to reimburse for a check sent by my health insurance. This advice was wrong as it resulted in the error message “Error: Amount entered exceeds the maximum contribution available amount.”
I called again and was told that I should mail them a Distribution Reversal Form along with a paper check. The form is, for unknown reasons, not readily available on their website, but they emailed me a copy. I have included the November 15, 2019 version of the form in this article as an example. However, if you are doing this process yourself, you may want to reach out to HSA Bank directly to request an updated version.
Filling out the form requires knowing the date of the original distribution, which you can look-up on your HSA Bank transactions, and selecting the reason you are requesting to reverse the distribution.
The listed reasons are:
- A claim/distribution was overpaid and I authorize HSA Bank to redeposit the overpayment.
- A distribution was withdrawn in error and I authorize HSA Bank to redeposit the amount.
- My account was closed by HSA Bank due to lack of verified identification but is now open and I authorize HSA Bank to redeposit the full amount.
For my form, I selected option 1, “A claim/distribution was overpaid and I authorize HSA Bank to redeposit the overpayment.”
You then sign below and include a check made out to your HSA Bank account.
The form says that it may take them three weeks to process the information. I also questioned the lack of service, forms, and general information about the process. When they finally processed mine, they replied by email saying:
We have found this question is more accurately addressed when a back-and-forth verbal dialogue can be utilized. At your earliest convenience, please contact our Client Assistance Center toll-free at 1-800-357-6246 or international 920-803-4100 so we can verify your account before proceeding to assist you. Our representatives are available 24 hours a day, 7 days a week.
I understand their concern. They are not willing to take my word for what happened, nor are they willing to trust me for understanding the legal implications of what is required. But their own support personnel should be able to give the correct advice and not further confuse the matter. I am including my experience here so that you can understand the process and how that process is implemented for at least one HSA custodian.
Let this be a lesson that you may need to persist in order to put the money back into the account. The benefits of maximizing an HSA account far exceed the work in order to do so, which is why we almost always recommend funding your HSA to the limit every year and reimbursing for qualified medical expenses.
Photo by Jared Erondu on Unsplash