HELP! FSA reimbursement denied for Umbilical Cord Blood Banking for baby of T1 parent

As you may have seen in a blog post a few weeks ago, my son Zachary was born on November 9. Now comes the battle with the insurance company.

Considering the potential benefits of umbilical cord blood/stem cells to children of T1D's (or the T1 parent themselves), my wife and I decided to have his cord blood stored and frozen, which is pretty common practice these days. In anticipation, we had $1000 put in our Flexible Spending Account (FSA) to fund this.

(In the United States, if you don't know, an FSA is an account that an employee of a participating company sets up to fund medical needs with pre-tax dollars. Each year, the employee decides how much money should go into this account, and money comes out of each paycheck - before taxes - to fund it. The employee then requests reimbursement from this account for eligible medical needs. If the money in the account is not used by the end of the year, it is forfeited).

Anyway, with our first child in 2007, we were told that if I submitted a claim along with a note from my doctor, explaining my Type 1 diabetes and the merits of this process, we would be reimbursed. We did this, and all was well. For Zachary, we were told the same thing, and also submitted a letter from my current endo, but this time we are being denied reimbursement because it has "potential" and not "immediate" benefits. These are based on IRS rules (which are worded very vaguely) and not the plan administrator's rules. So now, in addition to paying for the collection with after-tax dollars, we are stuck with nearly $1000 in this account which we are about to lose. We've tried some appeal processes but are having little luck.

Has anyone had to go to battle and ultimately succeeded in getting FSA reimbursement for cord-blood banking? If you've got a particular wording that you've used, or an excerpt from the IRS code (or anywhere else) that supports your claim, please let me know.


That sucks. One thing I'd consider doing would be to just buy $1000 in test strips or pumping supplies or something like that to use up the FSA? We had an FSA once and the process was *extremely* aggrivating.

I believe that some of the problem may have been related to the storage "just in case." It may be that you were denied because your son is undiagnosed. But you are. Perhaps if you doctor reworded it to say that the storage is not for your undiagnosed son's condition, but for your condition, then you would get coverage.

I would first appeal the denial and submit the same paperwork and the approval result from 2007. Is it the same company?

May I ask who "we" are where you said - "we were told that if I submitted a claim along with a note from my doctor, explaining my Type 1 diabetes and the merits of this process, we would be reimbursed. We did this, and all was well. For Zachary, we were told the same thing,"?

If that FSA has to be used by the end of year, I would do what acidrock suggested and spend the money on your immediate needs.

BSC - I'll need to check the wording of the letter, but it's possible that it was interpreted to benefit my son, not myself. The odd thing is that the claim was put in my wife's name, because she was the one giving birth. Figuring out the name to file under was difficult enough as it is.

Karen - Definitely planning to appeal; I hope I can even find the 2007 paperwork. The fact that it's at the end of the calendar year makes it more difficult though, since the appeal process takes some time, and I may need to follow through with Acidrock's suggestion. The "we" I mentioned is actually my wife. She is the employee under whose healthcare plan we are covered.

Well, I've put together a 19-page packet of an appeal, including the 2007 submission, and citing a web page from Aetna (even though I use United Healthcare) and including a letter from the IRS to a Congressman from Kentucky who asked about this. I also made it abundantly clear that MY diabetes is pre-existing, and that the cord blood can help me as well.

I hope it works. I think it would be tough to deny this claim after my appeal (which took 5 hours). I'll let you know how it works out. (I think I should have been a lawyer...)

For anyone interested, or someone who may find this discussion and want to use the info for their own purposes, here are the useful links I found.

Aetna's website states "When recommended by a health care professional for an existing medical condition with the unborn child or any other genetically-related family member covered under the FSA, amounts paid for umbilical cord blood are qualified medical expenses":

The IRS letter states: “...expenses from banking cord blood to treat an existing or imminently probably disease may qualify as [tax] deductible medical expenses. However, banking cord blood as a precaution … does not satisfy the existing legal standard that at a minimum a disease must be imminently probable.":

Scott, that really sucks, I'm so sorry. I often feel that the ins co's mission statement is to make things as difficult and unreasonable as possible! I'd think that, given that you were approved previously, you'd have a good chance with an appeal. However... I'm not in the ins business, and I tend to be a common-sense thinker.

Good luck, please keep us posted! How about more pics of your new angel?