Accounting Questions Regarding Insurance

[John Edwards]

On Sun, Feb 14, 2010 at 5:02 PM, David T. <sunfish62 at yahoo.com> wrote:

> Here is the basic set-up: I go to a doctor, and pay with a check. After
> some time, I gather up several such payments, and I submit them to my
> insurance company. After another stretch of time, the insurance company
> sends me a check for a portion of what I paid, and I deposit that check into
> my checking account.
>
> What I am trying to figure out is how to enter these transactions in
> Gnucash such that I can track:
>
> a) which payments need to be submitted,
> b) what the insurance company still has, and
> c) how much I can deduct on my taxes.
>
> Here is how I am now thinking to handle this going forward:
>
> 1) When I pay the doctor, enter a transaction:
> From-> Assets:Current Assets:Checking   $100
>  To-> Expenses:Medical:Doctor      $100
> (this one is easy)
>
> 2) When I submit the payment to insurance:
> From-> Expenses:Medical:Doctor $100
>  To-> Assets:Accounts Receivable $100
>
> 3) When the insurance company sends its check:
> From-> Assets:Accounts Receivable $100
>  To-> Expenses:Medical:Reimbursed $70 [the amount of their check to me]
>  To-> Expenses:Medical:Doctor $30
>     (or possibly into a generic Unreimbursed?)
>

The problem with #3 is that you haven't put the cheque into your bank
account. The $70 should go into Assets:Current Assets:Checking. Since the
$70 came back to you, it's not really an expense, in the end. After all of
these transactions, there should be $30 less in your checking account ($100
out, $70 in) than when you started.

With #2, I don't think the full amount is really a receivable. If you know
how much your reimbursement is going to be, then that would be the amount
receivable. If you do that, then your transaction #3 is simply $70 from
AR:Insurance to your chequing account.

My inclination would be to set up the reimbursement account as a subaccount
of the original expense (in this case Expenses:Medical:Doctor). The
reimbursement account will always have a negative balance, but its balance,
combined with the main expense account will give you your unreimbursed
amount (which, I presume, is what you need for your taxes).

John Edwards