Coordination of Benefits, a Prior-Authorization Denial, and an HSA That Isn't Allowed

Order of benefits: for dependent children of married parents, the birthday rule applies - the plan of the parent whose birthday falls earlier in the calendar year is primary. Priya's March 2 birthday precedes Dev's July 14, so Priya's HDHP is primary and Dev's PPO is secondary. (The gender rule applies only in specific divorce-decree situations.)

HDHP payment:

• Allowed amount: $9,000
• Deductible: $3,500 (none met) → $5,500 remains
• Coinsurance 20% of $5,500 = $1,100
• HDHP pays $9,000 − $3,500 − $1,100 = $4,400
• Member responsibility under the HDHP: $4,600

Additional points:

• The ER claim is an emergency service, so it must be cost-shared at the in-network rate; the plan cannot impose a separate out-of-network penalty here.
• The $4,600 credited toward the HDHP family out-of-pocket maximum leaves $2,400 of family cost sharing before the HDHP pays 100%.
• Dev's PPO, as secondary, takes the claim using its own allowed amount and pays some or all of the remaining $4,600 according to its rules; whatever it pays reduces the family's net exposure. Do not assume the secondary pays the primary's deductible and coinsurance in full.

Judgment point: the family should not pay the first bill that arrives. Submit to the secondary before deciding what is owed.

Depends on how the plan applies the missing prior authorization, and the difference is large.

• If the plan denies the claim outright (common for elective procedures): Dev owes the surgeon the full $14,000 billed, plus whatever the surgeon charges above the allowed amount. Amounts for services the plan does not cover generally do not accrue toward the out-of-pocket maximum, so this spend may not protect him later in the year.
• If the plan reduces payment instead of denying: it applies the $500 deductible and its out-of-network coinsurance to the $10,000 allowed amount, and Dev owes the coinsurance plus the $4,000 balance between billed and allowed. That balance billing is the surgeon's contractual right when the plan has no network agreement.

What to tell him:

• Emergency care can never require prior authorization and must be cost-shared in-network; elective surgery is different, and the plan's utilization-review rules control.
• He can request retrospective review or a retro authorization, file a written grievance, and - if the denial is upheld on internal appeal - pursue external review under Minnesota and federal patient-protection rules.
• On appeal, the argument is medical necessity and that the requirement was not clearly disclosed. Ask the surgeon's office to submit clinical documentation and to reduce or re-price the balance.
• His general-purpose FSA can reimburse out-of-pocket medical expenses he pays, including amounts his insurance did not cover, up to the $2,000 he elected.

Judgment point: the worst outcome is paying the $14,000 bill without appealing; the second worst is assuming the payment counts toward the out-of-pocket maximum.

No - not while Dev's general-purpose FSA is in force.

• HSA eligibility requires HDHP coverage and no disqualifying coverage. A general-purpose health FSA is disqualifying coverage because it reimburses the same kinds of expenses before the deductible is met.
• Dev's FSA is a family FSA covering him and the children. Because disqualifying family coverage exists, Priya is not an eligible individual for any HSA contribution - not even the self-only amount - while the FSA is active. That is true even though her HDHP is otherwise a qualifying plan.
• A grace period or carryover on the FSA extends the disqualification into the next year.

Fixes:

• Convert Dev's FSA to a limited-purpose FSA (dental, vision, preventive) or a post-deductible FSA, which is HSA-compatible.
• Or drop the FSA at open enrollment and fund the HSA instead - generally the better tax result for a family, since the HSA is portable and triple-tax-advantaged.
• Contributions already made while ineligible are excess contributions and must be removed with earnings or corrected, or they are taxed and penalized every year they remain.

Judgment point: the question is not 'does she have an HDHP' but 'does any other coverage pay first.' Family FSA plus family HSA is the classic double-dip that gets caught at tax time.