How do I categorize reimbursed medical expenses

Lamp

How do I categorize HRA reimbursed medical expenses throughout the year? I have a Medical expense category for payment of expenses from a checking account BUT when the HRA reimbursement transaction auto-deposit arrives in my checking account:
1) How do I capture the decrease (credit) to that medical expense category and
2) increase (debit) the checking account and
3) have the transaction auto flow to a medical reimbursement category (income or expense??) in order to capture a full year of reimbursements for tax reasons.

Sherlock

There are many way's we may manage HRA reimbursed medical expenses.  One way is to enter the reimbursement as a deposit transaction from the HRA payee in the checking account as a split if necessary to correspond to the appropriate reimbursed medical expense categories.   An HRA payee report captures the reimbursement.

Sherlock

There are many way's we may manage HRA reimbursed medical expenses.  One way is to enter the reimbursement as a deposit transaction from the HRA payee in the checking account as a split if necessary to correspond to the appropriate reimbursed medical expense categories.   An HRA payee report captures the reimbursement.

tjk

I see how that can work, but what if I'm also tracking my HRA account balance? I have a savings account named HRA. When I write a check to the doctor, the amount gets categorized as Medical Expense. If I follow your suggestion, when I receive the HRA reimbursement, the Medical Expense will be offset, but the HRA account balance won't decrease. I'm a long-time Quicken user, but I'm new to HRAs.

Sherlock

tjk said:

I see how that can work, but what if I'm also tracking my HRA account balance? I have a savings account named HRA. When I write a check to the doctor, the amount gets categorized as Medical Expense. If I follow your suggestion, when I receive the HRA reimbursement, the Medical Expense will be offset, but the HRA account balance won't decrease. I'm a long-time Quicken user, but I'm new to HRAs.

If you're entering a deposit transaction from the HRA payee in the checking account, you should enter a withdrawal transaction in the HRA savings account in the amount of the deposit.

Frankx

Hi @tjk

The proper accounting for HRA's is as follows:

1) the HRA account in Quicken increases by the withheld amounts (i.e. deductions) from your paycheck;
2) the HRA account in Quicken decreases by the payments that you make for qualified health care expenses.

Which means that you do not post any payments to "Medical Expense" until you have incurred medical expenses that (in total) are more than the annual amount that will be withheld from your salary for medical expenses (and will be deposited in the HSA account) in any given calendar year.  Stated another way, there will be no amounts in the "Medical Expense" category for any year unless you have either a) underfunded the MSA account or b) incurred medical expenses that are not permitted to be funded by the MSA account.

Let me know if you have any followups.

Frankx

tjk

Thank you Frankx.

Maybe I'm just way overthinking things, but the method you describe doesn't seem to account for a couple things - time lag between "expense" incurred and its reimbursement, and uncertainty about what will be reimbursed. Your explanation would apply to me if my "expenses" were paid directly from the HRA, but they are not.

Let me give a more detailed explanation of a single payment/reimbursement cycle, to see how your explanation might fit into it. I am a retiree who just became Medicare eligible last month (so there's no paycheck and thus no deductions). My former employer established an HRA for me, and makes an annual deposit at the beginning of each year to cover some of the expenses for the upcoming year. I have a savings account in Quicken named "QHRA" and a checking account in Quicken named "QChecking". I have selected Medigap coverage, so I have to pay monthly premiums to medical, dental, and vision care insurers. When I pay a medical insurance premium, I enter a transaction in the QChecking account with the category "Medical Insurance Premium". Later (assuming there are sufficient funds in the HRA), I am reimbursed for this premium with a direct deposit into the checking account from the HRA. When I receive that reimbursement, I record a transfer transaction from QHRA to QChecking. At that point, as you point out, there is no longer a Medical Insurance Premium expense for that month. But in the interim there was, and it can take up to six weeks for a reimbursement to arrive, so when I run a report by category for the month in which the transaction was entered, I (naturally) see the amount for Medical Insurance Premium. Until the reimbursement arrives, I don't know for sure whether or how much of that particular transaction will be reimbursed.

So, with this "reimbursement only" constraint, I have to write checks each month and, when I do, I categorize those transactions. I have used Quicken for over twenty years, and have never entered a single uncategorized transaction. The whole point in my having Quicken is to keep track of where the money is going, so I always categorize. According to your method, it seems like I would have to go back after the reimbursement arrives and remove the category from the original transaction in QChecking (perhaps also making it a split transaction if the reimbursement only covered a portion of the expense). That would leave me with an uncategorized transaction, which I'd like to avoid. In addition, I prefer to see the whole picture of what happened financially, so I'd like to see the expense and its subsequent reimbursement, rather than just having the expense disappear from the record once it is reimbursed.

Originally, I had it all set up without creating the QHRA account in Quicken, and it worked great. The original transaction in QChecking would be categorized as Medical Insurance Premium, and the reimbursement would show as a deposit into QChecking from payee "HRA", also categorized as Medical Insurance Premium. Thus, the categorized reimbursement (if there were one) would offset the categorized expense and, until it did, the categorized expense would still show. The only downfall of this was that I couldn't track the HRA balance, since there was no Quicken account set up for it. I guess I could go back to this way of doing things, and still keep QHRA. To do this, I would enter the categorized expense and categorized reimbursement transactions in QChecking as I was before, but I would also have to enter a separate withdrawal transaction into QHRA for every direct deposit from payee HRA in the checking account, to decrease its balance by the reimbursement amount, as Sherlock suggests. I was just hoping there would be a way that didn't carry the risk of me forgetting to make the corresponding withdrawal entry in QHRA.

Hopefully, I have explained the situation well enough. Any thoughts?

Sherlock

tjk said:

Thank you Frankx.

Maybe I'm just way overthinking things, but the method you describe doesn't seem to account for a couple things - time lag between "expense" incurred and its reimbursement, and uncertainty about what will be reimbursed. Your explanation would apply to me if my "expenses" were paid directly from the HRA, but they are not.

Let me give a more detailed explanation of a single payment/reimbursement cycle, to see how your explanation might fit into it. I am a retiree who just became Medicare eligible last month (so there's no paycheck and thus no deductions). My former employer established an HRA for me, and makes an annual deposit at the beginning of each year to cover some of the expenses for the upcoming year. I have a savings account in Quicken named "QHRA" and a checking account in Quicken named "QChecking". I have selected Medigap coverage, so I have to pay monthly premiums to medical, dental, and vision care insurers. When I pay a medical insurance premium, I enter a transaction in the QChecking account with the category "Medical Insurance Premium". Later (assuming there are sufficient funds in the HRA), I am reimbursed for this premium with a direct deposit into the checking account from the HRA. When I receive that reimbursement, I record a transfer transaction from QHRA to QChecking. At that point, as you point out, there is no longer a Medical Insurance Premium expense for that month. But in the interim there was, and it can take up to six weeks for a reimbursement to arrive, so when I run a report by category for the month in which the transaction was entered, I (naturally) see the amount for Medical Insurance Premium. Until the reimbursement arrives, I don't know for sure whether or how much of that particular transaction will be reimbursed.

So, with this "reimbursement only" constraint, I have to write checks each month and, when I do, I categorize those transactions. I have used Quicken for over twenty years, and have never entered a single uncategorized transaction. The whole point in my having Quicken is to keep track of where the money is going, so I always categorize. According to your method, it seems like I would have to go back after the reimbursement arrives and remove the category from the original transaction in QChecking (perhaps also making it a split transaction if the reimbursement only covered a portion of the expense). That would leave me with an uncategorized transaction, which I'd like to avoid. In addition, I prefer to see the whole picture of what happened financially, so I'd like to see the expense and its subsequent reimbursement, rather than just having the expense disappear from the record once it is reimbursed.

Originally, I had it all set up without creating the QHRA account in Quicken, and it worked great. The original transaction in QChecking would be categorized as Medical Insurance Premium, and the reimbursement would show as a deposit into QChecking from payee "HRA", also categorized as Medical Insurance Premium. Thus, the categorized reimbursement (if there were one) would offset the categorized expense and, until it did, the categorized expense would still show. The only downfall of this was that I couldn't track the HRA balance, since there was no Quicken account set up for it. I guess I could go back to this way of doing things, and still keep QHRA. To do this, I would enter the categorized expense and categorized reimbursement transactions in QChecking as I was before, but I would also have to enter a separate withdrawal transaction into QHRA for every direct deposit from payee HRA in the checking account, to decrease its balance by the reimbursement amount, as Sherlock suggests. I was just hoping there would be a way that didn't carry the risk of me forgetting to make the corresponding withdrawal entry in QHRA.

Hopefully, I have explained the situation well enough. Any thoughts?

As I said at the outset, there are many way's we may manage HRA reimbursed medical expenses.

Have you considered using a memorized payee split transaction for the reimbursement deposit that includes the transfer and the categorized reimbursement?  It's a bit tricky as it requires a balancing withdrawal.  For example,  if you receive a direct deposit of $XXX from payee HRA in QChecking, the split transaction might look like:

[QHRA]                                         $XXX
[QChecking]                            -$XXX
Medical Insurance Premium  $XXX

tjk

Thanks, Sherlock! I have adopted your suggestion and it works well.

Soopy

Thank you, everyone, for this question and useful answers. I applied it successfully to a reimbursed purchase of prescription eyeglasses.

The original transaction used a credit card and was entered into Quicken with a Medical Expense category. Later, I received a check from the insurer provided Flex account (not an HSA or the result of an income deduction) which I deposited to checking. This was entered into Checking from payee Flex with a split transaction as shown in Sherlock's answer above. This produced a proper reduction in the Flex account balance, deposit of matching funds into checking and negating Medical Expense category entries so that the Category report will show a record of the cost of glasses but not a tax deductible or budget-able expense since I effectively paid nothing.