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Reimagining Healthcare Claim Substantiation

Claim substantiation workflows are one of the most critical yet often overlooked aspects of managing tax-advantaged healthcare spending accounts (HSAs and FSAs). With over $138 billion flowing through these spending and investment accounts, the process of verifying medical expenses has remained a time consuming and manual process until now. Let's take a look at how the latest in healthcare interoperability is helping transform a small piece of a major workflow.

Understanding Claim Substantiation:

At its core, claim substantiation is the name of the process of validating medical expenses reimbursed through health spending accounts, such as HSAs and FSAs, and verifying them as legitimate medical expenses under IRS guidelines. These tax-advantaged accounts have strict guidelines that TPAs and employers must follow and mismanaged substantiation can result in significant tax penalties and even cause an entire cafeteria plan to lose its tax-advantaged status. Under Section 125 rules, all claims must be substantiated by an independent third party, with no exceptions for small amounts or trusted providers.

Per IRS requirements, every claim must include:

The gold standard for substantiation is the Explanation of Benefits (EOB) from a health plan or insurance company. This document shows the patient's cost-sharing responsibility through deductibles, copays, and coinsurance.

The Current Process:

The most common claim submission and substantiation processes are manual, requiring lots of chart and paper chasing for patients, providers, and administrators alike. Account holders must carefully track every qualified medical expense, collecting and organizing paper receipts, EOBs, and provider statements in some cases. These documents must be manually submitted for verification, often via clunky web portals or even by fax.

The challenges multiply for individuals managing chronic conditions or families with multiple HSA or FSA accounts and expenses. A single misplaced or lost receipt can result in a denied claim. Let’s recall how long it took for my family to collect an accurate billing statement in my blog post from a few weeks ago… losing a receipt might require you to wait several weeks just to get a copy of a medical bill you’ve already paid.

For third-party administrators (TPAs), the manual verification process is resource-intensive and prone to errors. Each claim requires careful review to ensure it meets IRS requirements. The process becomes even more complex with "dual purpose" expenses – items that could be for either medical or general health purposes – which might require additional documentation like Letters of Medical Necessity.

Rethinking Claim Substantiation: Electronic EOB Retrieval

Flexpa's API-first approach to consented record retrieval helps reimagine this process via electronic Explanation of Benefits retrieval. Instead of requiring patients to manually store and upload EOBs, receipts, and clinical documentation, Flexpa enables direct, secure access to health plan payer data.

Here's what a modernized approach to EOB retrieval looks like with Flexpa:

This solves multiple problems all at once:

First, it eliminates the burden of manual document collection and submission for account holders. No more sorting through piles of receipts or scanning documents – the necessary information is pulled automatically from the health plan with all of the necessary notes and documentation contained within a JSON bundle retrieved using Flexpa’s Records API.

Second, it improves accuracy and compliance. By retrieving EOB data directly from payers, Flexpa ensures that substantiation is based on authoritative source documentation rather than potentially incomplete or inaccurate user-submitted receipt.

Third, it dramatically speeds up the reimbursement process. Rather than waiting days or weeks for manual review, reimbursement claims and transactions can be verified and retrieved instantly against electronic EOB records.

Electronic claims data retrieval represents a fundamental reimagining of how the healthcare ecosystem thinks about the care journey, and now, how personal finances are affected.

If any of this resonates with you, let’s continue the conversation – click here to schedule a call to tell us more about what you’re building and where Flexpa fits in.