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Understanding Letters of Medical Necessity and Their Role in Healthcare Spending

Published on

Nov 15, 2024

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Author

Griffin Baker

In the world of healthcare, not all treatments or medications are immediately covered by insurance or eligible for tax-advantaged spending accounts like Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs). This is also true for employers offering Individual Coverage Health Reimbursement Arrangements (ICHRA), where certain expenses may require additional documentation to qualify for reimbursement. Enter the Letter of Medical Necessity (LMN)—a formal document that bridges the gap for treatments not universally recognized as medically necessary.

Why Are Letters of Medical Necessity Required?

The requirement for LMNs stems from the guidelines outlined in Internal Revenue Code 213-d, which clarifies what qualifies as a medical expense for reimbursement under tax-advantaged accounts. To be eligible:

The expense must diagnose, treat, mitigate, or prevent a specific medical condition.
It cannot simply be for general health, well-being, or cosmetic purposes.

For treatments or items that blur the line between medical and elective use—such as Botox or semaglutides—an LMN is required to prove their medical necessity. This ensures compliance with IRS rules and protects the tax-advantaged status of these accounts.

When Are Letters of Medical Necessity Needed?

LMNs are typically required for treatments, medications, or services that are not universally recognized as medically essential but have legitimate therapeutic uses.

Common Examples:

Botox for Migraines: While Botox is often associated with cosmetic enhancements, it is FDA-approved for treating chronic migraines. An LMN is required to confirm that the treatment is medically necessary in your case.
Semaglutides for Weight Management: Medications like Ozempic or Wegovy, originally developed for Type 2 diabetes, are also prescribed for obesity or related conditions. If you're using these medications to manage a specific health risk, an LMN can justify the expense.
Massage Therapy: Frequently recommended for conditions like chronic pain or injury recovery, massage therapy may require an LMN to qualify for reimbursement.
Specialty Foods: For individuals with dietary restrictions due to medical conditions (e.g., gluten-free products for celiac disease), an LMN can help establish eligibility for reimbursement.

The Intersection with Venteur’s Health Wallet

The Venteur Health Wallet offers a seamless way to manage healthcare expenses, even for items requiring an LMN. Here’s how it works:

Health Wallet Debit Card Usage: If an LMN is needed for an expense, such as Botox or semaglutides, the Health Wallet debit card will decline the transaction. But that does not mean your expense is not Health Wallet eligible. Employees will need to pay out of pocket and upload the expense to the Venteur platform along with the LMN for reimbursement.

Submit Your Health Wallet Expense for Reimbursement: You can submit your Health Wallet expense for reimbursement via your Venteur account. For faster processing, include your LMN with your documentation.

Tips for Obtaining a Letter of Medical Necessity

Consult Your Healthcare Provider: Your doctor should detail why the treatment or item is necessary, including relevant diagnosis codes.
Check Employer and Plan Requirements: Ensure the LMN meets the specific documentation standards of your plan administrator or employer.
Keep Records Updated: LMNs often need annual renewal to maintain coverage or reimbursement eligibility.

Ready to improve your healthcare spending? Contact us to learn more about how Venteur can support your employees' needs.

FAQs

You got questions, we got answers!

We're here to help you make informed decisions on health insurance for you and your family. Check out our FAQs or contact us if you have any additional questions.

How does an ICHRA work?

ICHRA stands for Individual Coverage Health Reimbursement Arrangement (ICHRA). This health arrangement allows you to pick your own health insurance plan using your employer’s monthly tax-free allowance. These funds can be used to cover insurance premiums, including dental and vision, as well as qualified medical expenses.

What are the benefits of an ICHRA?

Your health plan belongs to you, and you can keep your health insurance if you leave your company.
You get to choose from any qualified health plan on the market. Venteur can help you select a plan where your preferred doctors, providers, and prescriptions are covered.
If you choose a health plan that costs less than your employer contribution, the extra funds are added to Venteur’s Health Wallet, an account used to pay for qualified medical expenses.

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What's the difference between an ICHRA and a Group Plan?

Group health insurance plans are purchased by companies and offered to their employees. Traditional group plans take a one-size-fits-all approach to healthcare, giving employees limited choice when it comes to their coverage options. Employer-sponsored ICHRAs give employees a tax-free allowance to pick any plan on the public exchange that meets their unique needs.

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What expenses are reimbursable through my Health Wallet?

You can use money in your Health Wallet to pay for qualified medical expenses, as the IRS defines in Publication 502. The full list is available here: https://www.venteur.com/post/213-d-reimbursements-or-health-wallet.

Please note that some expenses, like gym memberships or vitamins, are only reimbursable if you obtain a doctor's note confirming medical necessity.

What is the Health Wallet and how can I use it?

1. What Your Health Wallet Balance Represents:

Your Health Wallet balance could be thought of as a measure of the medical expense reimbursements you're entitled to under your health insurance plan. It's essential to note that it isn't quite like a bank account with a set amount of accessible cash. Rather, consider it as a marker of what you're eligible to get reimbursed for as part of your ICHRA plan.

When you shop for insurance through the app, you will see a dollar amount that is available for out-of-pocket expenses. This amount is what gets contributed to your Health Wallet account for your use in reimbursements. However, depending on how your employer has setup the account, it may be available immediately or it may be available after every monthly invoice.

2. Your Health Wallet Account:

When your account is setup, there is a predetermined way on how your Health Wallet functions for your reimbursement funds. The first scenario is that there is money that has been set aside at the start of the period which can be used for your reimbursements. You may see the entire amount entitled to you is immediately available for medical expense reimbursements. It's like having a store of health benefits ready to be used when you need them.

3. Simplifying the Health Wallet Experience:

We're always striving to enhance your experience and are currently working on making the Health Wallet balance operate more like a pre-paid debit card. This shift aims to streamline the funding process further and allow you quicker and more direct access to your health reimbursements, leading to an even smoother journey for you.

Remember, whether your account shows the funds immediately or after every invoice, it doesn't affect the overall sum you're entitled to under your ICHRA plan; it merely affects the timing of when you will receive the reimbursements.

Your trust is important to us, and we're continually striving to make our services better for you. If you ever have questions about your Health Wallet or anything that would help make for a more understandable benefits experience with us, don't hesitate to reach out to our customer service team.

What criteria does Venteur use to make plan recommendations?

We’ve built an AI model that uses something called a 'composite patient'. We use over 30 years of historical claims data and your age, gender, and zip code to predict your total healthcare spending under each plan. As you add additional information to your profile--specific doctors, prescriptions, risk profile, etc.--your list of recommendations becomes more personalized.

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