May 14, 2010
Healthcare Reform: Coverage for OTC Medications
~ written by Char Sutek, Employee Benefits, Willis
Starting January 1, 2011, health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) can no longer reimburse participants for non-prescribed over-the-counter drugs/medicines (OTC items) other than insulin. If the OTC item has been prescribed by an appropriately licensed healthcare provider, health FSAs and HRAs may still provide for reimbursement of such items. After December 31, 2010, non-prescribed OTC items other than insulin also will no longer be qualifying medical expenses that a health savings account
(HSA) or Archer MSA can reimburse on a tax-free basis.
Employers that sponsor health FSAs or HRAs that have allowed reimbursement of OTC items will need to amend their plan documents to clarify that OTC items other than insulin will no longer be reimbursable without an appropriate prescription (or to disallow reimbursement of OTC items altogether, if that is preferred). Plans making these amendments must distribute either an updated summary plan description or a summary of material modifications describing the change. Plan administrators and TPAs acting on their behalf in administering claims under health FSAs and HRAs will need to establish procedures to prevent reimbursement of OTC items generally and, if the health FSA or HRA provides for it, to allow reimbursement for insulin and prescribed OTC items.
Employers may wish to review their communications materials in connection with contributions to HSAs, however, to ensure that they do not include statements about OTC items that will be inaccurate in 2011.
Need help understanding the new Healthcare reform provisions? Contact Char Sutak at Willis, 614/326.4907 or firstname.lastname@example.org.