Accounting for private medical insurance and reimbursements

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Hello,

I'm using Quicken Classic Premier on Windows. I'd like to come up with an accounting method that makes sense for the following (seemingly simple) scenario:

1. I buy private medical insurance (let's call this "expense A" in my checking account )
2. I then pay for medical service (let's call this "expense B" on my credit card )
3. The insurance then reimburses (let's call this "payment C" in my checking account).

As you can imagine, steps #2 and #3 replay a bunch of times whenever I go to the doctor as you can imagine, and I buy insurance on a yearly basis.

Question - What's a good system (categories, separate accounts, transfers etc…) to track the cost of insurance, the cost of medical services and the insurance reimbursements?

Boatnmaniac

Good question. Here is what I have done:

1. Some Categories are already set up but they are too general and have some other issues (like some are missing the tax line item association). So, I've customized my Category List to organize the expenses under Healthcare (for cash out of pocket medical expenses) and under Insurance:Healthcare as shown here. Many of these subcategories are ones I created via the New Category button.:
   
2. If the Category or Subcategory does not have the correct Tax Line Item shown, it will need to be added. To do this, click on the category to shade the line for that category and on the right in the Action column you will see a Button. Click on that Action Button and click on Edit to open the Edit Category popup. Then click on the Tax Reporting tab, check the box for Tax related category and select the appropriate Tax line item from the drop-down menu. Then click on Save. Makiing sure the categories have the correct tax line item associated to it will then capture those transactions with those categories in the appropriate Tax Reports and in Tax Planner.
3. Insurance Premium transactions: Use the appropriate Insurance:Healthcare category(ies).
4. Out-of-pocket medical expenses: Use the appropriate Healthcare (non-insurance) categories for purchases/payments you make for things like doctor visits, prescription drugs, prescription glasses (Vision), etc.
5. Reimbursements from the insurance company(ies): Use the same Healthcare (non-insurance) categories for these but enter them as deposits instead of expenses. Doing this will result in the reimbursements offsetting some or all of the cash-out-of pocket expenses that were incurred. You can enter something in the Memo field to help tie the transaction back to the original expense incurred if you wish. For instance, I have entered something like "Reimb for 5/1/2024 Dr Good visit" or "Reimb for 6/1/2024 labs".
6. There are no transfer transactions involved in this arrangement at all….just expense categories that entered as either expenses or deposits into either the checking account or the credit card account.

I've been doing it this way for many years and it has worked really well for me.

If you want you can also take the Categories structure a little further by creating sub-categories for insurance reimbursements. For instance, for Healthcare:Physician you could create another subcategory for it that will look like this: Healthcare:Physician:Insurance Reimbursement. If you do this, make sure you use the same Tax Line items association for it that you use for Healthcare:Physician so it will be properly captured in the Tax Reports and Tax Planner.

Any questions?

NotACPA

A) Buying insurance is an expense in Q. Have you created a Category for this expense?

B) Paying for medical services can be either an Expense, OR an "Amount Receivable". If an Expense, you'd need a category for this. If a "Receivable" you'd need to create such an "Asset" type account.

C) If you used an Expense, then the reimbursement should use the same category as the B payment. If you use a Receivable, the reimbursement should use the same account as B. In either case, the payment and reimbursement would net out.

I'd be inclined to use the Receivables account because then you'd have an easy visual of the amount of reimbursements that you haven't yet received. Just be sure to periodically Reconcile the account, matching the payments to the appropriate reimbursements.

AND, if your insurance doesn't reimburse 100%, then you've got a medical expense for the difference. Which you'd need to post to the Medical expense category.

On the other hand, if you go the category route, you won't have that running "outstanding" figure … but any under-reimbursement would be handled automatically.

Your choice.

Boatnmaniac

Good question. Here is what I have done:

1. Some Categories are already set up but they are too general and have some other issues (like some are missing the tax line item association). So, I've customized my Category List to organize the expenses under Healthcare (for cash out of pocket medical expenses) and under Insurance:Healthcare as shown here. Many of these subcategories are ones I created via the New Category button.:
   
2. If the Category or Subcategory does not have the correct Tax Line Item shown, it will need to be added. To do this, click on the category to shade the line for that category and on the right in the Action column you will see a Button. Click on that Action Button and click on Edit to open the Edit Category popup. Then click on the Tax Reporting tab, check the box for Tax related category and select the appropriate Tax line item from the drop-down menu. Then click on Save. Makiing sure the categories have the correct tax line item associated to it will then capture those transactions with those categories in the appropriate Tax Reports and in Tax Planner.
3. Insurance Premium transactions: Use the appropriate Insurance:Healthcare category(ies).
4. Out-of-pocket medical expenses: Use the appropriate Healthcare (non-insurance) categories for purchases/payments you make for things like doctor visits, prescription drugs, prescription glasses (Vision), etc.
5. Reimbursements from the insurance company(ies): Use the same Healthcare (non-insurance) categories for these but enter them as deposits instead of expenses. Doing this will result in the reimbursements offsetting some or all of the cash-out-of pocket expenses that were incurred. You can enter something in the Memo field to help tie the transaction back to the original expense incurred if you wish. For instance, I have entered something like "Reimb for 5/1/2024 Dr Good visit" or "Reimb for 6/1/2024 labs".
6. There are no transfer transactions involved in this arrangement at all….just expense categories that entered as either expenses or deposits into either the checking account or the credit card account.

I've been doing it this way for many years and it has worked really well for me.

If you want you can also take the Categories structure a little further by creating sub-categories for insurance reimbursements. For instance, for Healthcare:Physician you could create another subcategory for it that will look like this: Healthcare:Physician:Insurance Reimbursement. If you do this, make sure you use the same Tax Line items association for it that you use for Healthcare:Physician so it will be properly captured in the Tax Reports and Tax Planner.

Any questions?