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Brought to you by Insurance Center of New England, Inc. |
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The Rules for Over-the-Counter Drugs Have Changed
A guide to what the future will bring
September, 2010 - Vol VIII |
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| Need More Information? |
For more on OTC changes or if you have questions regarding any of our previous Beyond Benefits topics, please contact Judy Davis at 750-7133.
For previous editions of our Beyond Benefits newsletters just go to our website, from the link provided icnegroup.com.
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| Changes to OTC Rules as of 2011 |
 President Obama signed into law the Patient Protection and Affordable Care Act (PPACA) on March 23, 2010. This new law contains many provisions that are set to go into effect over the next several years. One part of the law that will go into effect on January 1, 2011 changes how flexible spending account (FSA), health savings account (HSA) and health reimbursement accounts (HRA) reimburse participants for their over-the-counter (OTC) health care expenses. Employers will need to communicate these changes to their staff during their upcoming open enrollments. To assist employers in this regard, Beyond Benefits is providing a reference guide of the OTC rules that will go into effect January 1, 2011.
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| Summary of the new OTC Law |
PPACA mandates that expenses incurred for medicines and drugs, (with the exception if insulin) will not be eligible for reimbursement under a FSA, HSA or HRA unless the participant has a prescription from their physician. |
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| Effective Date | |
The new OTC law will apply to all purchases made on or after January 1, 2011. The new law will apply to a calendar year and not a plan year. For example, if your health plan year starts October 2, 2010, the requirement of having a prescription for the OTC drugs will not apply or be in effect until January 1, 2011. This effective date applies regardless of the plan year and regardless of any applicable grace period under a health FSA. |
| Verifying Prescription Purchases |
As of January 1, 2011 employees will be required to verify their OTC purchases in order to be reimbursed from their FSA, HSA, & HRA. Employees must provide the prescription or a copy and a customer receipt and submit a claim for reimbursement. FSA debit and credit card purchases will no longer be a payment option as the IRS advised that all plans must ensure these cards are reprogrammed to deny OTC medicines and drugs no later than January 15, 2011. |
| What is considered an OTC medicine or drug? |
 While the IRS has not provided specific definitions on what is considered over-the-counter medicines and drugs, it is generally presumed the following categories would be items requiring a prescription for reimbursement: allergy and sinus medications; cough, cold and flu medications; digestive aids; sleep aids; pain relievers; and stomach remedies.
The new rules do not apply to items for medical care that are not medicines or drugs. Therefore, equipment such as wheelchairs and crutches; supplies such as bandages and syringes; and diagnostic devices such as blood sugar test kits, as well as, saline solution will still qualify for reimbursement without a prescription. |
| IRS Resources |
The Internal Revenue Service has recently posted resources on the irs.gov website regarding the exclusion of OTC medicines and drugs as eligible medical expenses in order to receive reimbursement from an FSA, HSA and/or HRA without a prescription.
Please click the links below for more details.
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Insurance Center of New England's Beyond Benefits is providing this reference as general information only. It is not intended to be legal advice. |
 Insurance Center of New England, Inc. is a regional independent insurance agency providing full-service commercial and personal insurance protection and group employee benefits programs. Based in West Springfield, MA as Insurance Center of New England, Inc. and in Gardner, MA as Heritage Insurance Agency, we have satellite locations in Chelmsford, Danvers, Fitchburg, Lowell, Orange and Winchendon. |
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