eNewsFlash: Important update regarding FSA, HSA and HRA eligibility of Over-the-Counter (OTC) Medicines and Drugs

The IRS notice states that “beginning after December 31, 2010, expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such a medicine or drug is a prescribed drug (determined without regard to whether such a drug is available without a prescription) or is insulin.”

On September 3, 2010, the IRS issued additional clarification on how over-the-counter (OTC) medications will be reimbursed through Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) as a result of the new health care reform legislation.

What does it mean? Below is a summary of these important changes and how they will affect FSAs, HSAs and HRAs starting January 1, 2011 (regardless of plan start-date or plan grace-period extensions).

Doctor’s Prescription Required for Over the Counter Medications (OTCM)

In the latest statement released by the IRS, a “Letter of Medical Necessity” is longer considered an acceptable format for OTCM items. The IRS Notice states that “a prescription means a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.” eflex interprets this notice to mean that OTCM MUST be accompanied by a physician’s prescription in order to make a claim under an FSA or HRA. This does not affect other prescription medications with the use of the debit card.

IRS Will Accept Only Two Forms of OTC Substantiation

The IRS indicates that there are only two acceptable forms of documentation to qualify a prescribed OTC item as an eligible expense under an FSA or HRA:

1) A customer receipt indicating the name of the purchaser (or the name of the person for which the prescription applies) the date, the amount of the purchase and an Rx number.

2) If the customer receipt does not indicate an Rx number, then a copy of the doctor’s prescription must accompany the customer receipt when submitting the claim.

Debit Cards Can No Longer Be Used for OTCM as of 1-1-11

Prior to this ban on OTCM, a claimant could use their debit card to purchase over the counter medications. As of January 1, 2011 this feature of the debit card will be closed. However, a participant can still purchase prescribed medications using their debit card.

Can I ask my Medical Professional for a Prescription for OTCM?

Yes by all means. Most professionals will gladly comply and write a prescription. As mentioned prior, a medical letter is no longer acceptable as a prescription unless the State you live in recognizes medical letters as a prescription.

What is the process for filing a claim if I have an OTCM prescription?

The IRS Notice states that you will need to file a manual claim. In other words, go to eflexgroup.com/form page for a claim form. Fill out the form, provide the prescription information, then fax or mail to eflexgroup.com and we will process the claim. Or you can go to your eflexgroup.com account, fill out an online claim and submit a scanned prescription into the online claim process and click to upload. It’s that simple.

Can we still get reimbursed for certain medical supplies?

The good news is that the rules “do not apply to items that are not medicines or drugs” thus the debit card can still be used to pay for many other medical expenses after January, 1, 2011, including (but not limited to):

· Medical Supplies, such as bandages, crutches, wrist supports, first aid kits, etc.

· Vision Exams, Eye Glasses, Contact Lenses and Supplies

· Doctor and Dentist Co-pays

· Health Insurance Deductibles

· X-rays

· Routine Physicals

· Laser Eye Surgery

· Orthodontia

· Diabetic Supplies (note: Insulin does not require a prescription to remain an eligible expense)

What’s To Come?

At eflex, we understand that the new Health Care Reform laws can be confusing. We are committed to providing you with timely updates as they become available and we will continue to assist you with this transition as we enter the New Year. If you have any questions or concerns, please do not hesitate to contact your eflex Sales Representative at efgsales@eflexgroup.com or you may contact a Customer Care Representative at customercare@eflexgroup.com. You may also reach us at any time by calling our toll free number: 877-933-3539.

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About rjoyner

Ric Joyner, CEBS, GBA, CFCI Customer Experience Officer Ric is a founder of eflexgroup.com a national web based TPA for Cafeteria, HRA, HSA, Transit, VEBA and COBRA plans. eflexgroup is a leader in self-service employee benefit systems. eflexgroup was the first TPA in the industry to go “online” in 1999 allowing employees to self-serve 24 hours per day. He has lead the industry with eflex by placing provable customer service statistics, live, on eflexgroup.com Ric is celebrating his 32nd year employee benefits. He helped create TPAs such as TASC and Employee Benefits Corporation in Madison WI. He was a licensed insurance agent for 29 years. The designations Mr. Joyner holds are; Certified Employee Benefits Specialist, Group Benefit Associate, Certified Flexible Compensation Instructor, board approved by ASPA to teach Cafeteria Plan regulations. Ric also has a bachelors of science in Information Technology and MBA (emphasis is project management) and graduated summa cum laude from Capella University with a 4.0. Ric helped found the National Association of Professional Benefit Administrators (NAPBA.org). NAPBA is dedicated to training administrators in best practices and grass roots lobbying. Ric has served in the past as the Wisconsin Association of Health Underwriters State President in 2003. Ric is a frequent speaker and article writer for prestigious associations such as NAHU.org, NAPBA.org, Wisconsin SHRM, Austin SHRM, PACE.org, International Foundation of Employee Benefits, Tampa Bay AHU, WI AHU, Florida AHU, Florida NAIFA and participates on the List Serves (compliance programs for Consumer Driven Products of NAHU and International Foundation of Employee Benefits)

One thought on “eNewsFlash: Important update regarding FSA, HSA and HRA eligibility of Over-the-Counter (OTC) Medicines and Drugs

  1. Amy

    Sorry, I am still confused. If I wish to use an eflex card for an OTCM purchase, wouldn't it approve if the prescription is being filled through the pharmacy and purchase is made at the pharmacy's check out card machine? Does the status of the OTC drug then become a filled prescription even though the expense may still be purchased in the store ilse? I'd be running the prescription through my insurance as well. Thanks for your help

    Reply

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