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.