November 5, 2010
Healthcare Reform: OTC Medications
~ written by Char Sutak, 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.
In addition, non-prescribed OTC items (other than insulin) will no longer be a qualifying medical expenses that can be reimbursed on a tax-free basis through a health savings account (HSA) or Archer MSA.
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. Employees may disallow reimbursement of OTC items altogether, if they prefer.
Plans making these amendments must distribute either an updated summary plan description or a summary of material modifications describing the change. Plan administrators and Third Party Administrators of health FSAs and HRAs will need to establish procedures to prevent reimbursement of OTC items 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 current materials regarding HSA contributions to ensure they do not include statements about OTC items that will be inaccurate in 2011.
If you need help understanding the new Healthcare reform provisions, contact Char Sutak at Willis at email@example.com or 614/326.4907.