Navigating the landscape of health benefits can often feel overwhelming. With terms like HMOs, OAPs, QCHPs, and CDHPs floating around, understanding how to best manage your healthcare expenses is crucial. One valuable tool available to many employees is a health care assistance program, designed to help cover eligible medical costs. But what is a health care assistance program exactly, and how can it benefit you?
In essence, a health care assistance program is a benefit offered by employers that allows employees to set aside pre-tax dollars to pay for qualified medical expenses. These programs, often known as Flexible Spending Accounts (FSAs) or Health Reimbursement Arrangements (HRAs), provide a tax-advantaged way to manage healthcare costs throughout the year. One such program is the Medical Care Assistance Plan (MCAP), which we will explore in detail.
Diving Deeper into the Medical Care Assistance Plan (MCAP)
The Medical Care Assistance Plan (MCAP) is a specific type of health care assistance program designed to work alongside your existing health coverage, such as an HMO, OAP, QCHP, or CDHP (unless you are enrolled in a Health Savings Account – HSA). MCAP helps employees pay for eligible medically necessary expenses for themselves, their spouse, and eligible dependents. It’s important to note that dependents must meet the IRS qualifications to be considered eligible under the plan.
Who is Eligible for MCAP?
Generally, all active employees are eligible to enroll in MCAP during the annual Benefit Choice Period. However, it’s important to note that retirees, annuitants, and individuals enrolled in an HSA are typically not eligible for MCAP. This is a crucial point, as you cannot be enrolled in both an HSA and an MCAP Flexible Spending Account simultaneously.
How MCAP Works: Contributions and Limits
MCAP is funded through employee contributions, which are deducted from your paycheck on a pre-tax basis. For Fiscal Year 2025, the IRS limits MCAP contributions to a maximum of $3,200 per person, or $266.66 per month. For university employees paid over a period less than 12 months, this monthly limit may be adjusted. The minimum annual contribution to MCAP is $240, or $20 per month.
It’s worth highlighting that the $3,200 maximum is a per-person limit. This means that if both spouses are eligible under the State Employee Group Insurance Program (SEGIP), they can each contribute up to the $3,200 limit, maximizing their pre-tax savings for healthcare expenses.
Upon enrollment, participants receive a debit card at no cost, which can be used to pay for eligible expenses directly. While convenient, it’s important to retain documentation for expenses paid with the debit card, as substantiation may be required.
Understanding MCAP Rollover
One of the attractive features of MCAP is the rollover provision. For Fiscal Year 2025 MCAP funds, up to $640 of unused funds can be rolled over to the next plan year. This provides some flexibility and reduces the risk of forfeiting unused contributions at the end of the plan year. However, any amount exceeding the IRS allowed rollover amount will be forfeited. The rollover amount is typically added to your new MCAP account in October.
Crucially, to be eligible for the rollover benefit, employees must re-enroll in MCAP for the new plan year. If you do not re-enroll, any remaining funds after the September 30th run-out period, even those eligible for rollover, will be forfeited.
What Expenses are Eligible Under MCAP?
MCAP funds can be used for a wide range of eligible medical expenses. This includes:
- Prescriptions
- Certain over-the-counter (OTC) items
- Doctor visit co-pays
- Health insurance deductibles
- Coinsurance
However, it’s critical to understand that MCAP funds cannot be used for expenses that are covered by your insurance. If you mistakenly use MCAP funds for expenses covered by insurance, you will be responsible for reimbursing the FSA plan.
For a comprehensive list of eligible expenses, you should refer to the Optum Financial Flexible Spending Account Reference Guide. You can also contact Optum Financial Customer Service at 888-469-3363 for specific questions regarding eligible expenses.
MCAP and Termination/Retirement
Understanding how MCAP works in situations of termination or retirement is important for plan participants. If you are terminating or retiring, you will need to address your remaining plan year MCAP deductions. Generally, you will be required to pay a lump sum for the remainder of the plan year. This payment can be made on a pre-tax basis, deducted from your final paycheck or lump sum payment (like sick time/vacation payout). This pre-tax arrangement needs to be set up with your agency GIR before leaving employment. Alternatively, you can make a post-tax payment by writing a check for the full amount due. Payment is required to maintain your MCAP account.
MCAP and Unpaid Leave of Absence
For employees going on an unpaid leave of absence, continued MCAP coverage is possible. You can make post-tax personal payments directly to the Optional Tax Program Unit to maintain your coverage during your leave. It’s important to note that no monthly bill will be mailed for these payments.
Upon returning to work from a leave of absence where MCAP enrollment was terminated, you have a 60-day window to re-enroll in MCAP. Re-enrollment is not automatic; you must actively choose to re-enroll. If you do re-enroll, the effective date will be your return-to-work date, with payroll deductions beginning on the first day of the first full pay period following your return.
Is a Health Care Assistance Program Like MCAP Right for You?
Understanding what is a health care assistance program and how plans like MCAP function is the first step in making informed decisions about your health benefits. If you anticipate having predictable medical expenses throughout the year that are eligible under MCAP guidelines, enrolling in such a program can be a smart financial move. By utilizing pre-tax dollars to pay for healthcare, you can effectively reduce your overall healthcare costs and make your health benefits work harder for you. Consider exploring if MCAP or a similar health care assistance program is available through your employer and if it aligns with your healthcare needs and financial goals.
