Human Resources News & Insights

How reform changes medication reimbursement rules

It’s time to let employees know that many of the purchases they make with FSA or HSA money will no longer be covered next year.

Under the new healthcare reform law, FSA and HSA participants will no longer be able to use their account funds on over-the-counter (OTC) meds unless they have a prescription.

That means in order to get reimbursed by an FSA or HSA for purchasing Tylenol, antihistamines, etc., employees will need a note from their doctor.

However, employees can still be reimbursed for OTC items that aren’t meds — such as bandages, gauze, etc.

Also, in 2011 the penalty on non-qualified withdrawals from HSAs will be bumped up from 10% to 20%.

The new rules and penalties are designed to generate revenue to help fund portions of the new reform law.

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  1. I have a serious question (not trying to be sarcastic or make a point), but why can band-aids be purchased with non-tax dollars and allergy medications cannot? Even if you don’t agree, I am just curious as to the rationale… I’m relatively new to the FSA world, but wasn’t this how the regulations were up until a few years ago?

  2. “They” are going overboard on tryinfg to cut down on perceived abuse with FSA accounts. Sad that the very few are ruining it for us all. Theoretically, I could go out and buy twenty large bottles of Advil for $15.00 and supposedly get rich selingl them to twenty people at a 10% profit in very little time. (I mean, we all have headaches from all this so called “reform”, don’t we??) But I don’t think I could walk around my office selling $2.00 rolls of gauze at a 10% mark-up to my office mates– and the reformers know that….so they are not including cheap wound repairing items in their list. I am also trying to not be sarcastic, but it’s not easy.

  3. I supported Obama and health care reform. Not anymore.

  4. This is making the system even more confusing; eliminate all OTC and the other misc. items and stick with prescribed medications and professional care only. Physicians having to write a script for aspirin is ridiculous. Having a pharmacy tech enter this into the system to process before you can buy a bottle of aspirin is taking up additional time that shouldn’t be necessary for both parties. Then having the insurance company audit all these small purchases to make sure everyone is in compliance takes it over the top.

    If I want to run in to my local drug store to pick up a bottle of aspirin and use my HSA card – oops, can’t do that without my doctors orders. I lose my freedom to make an easy purchase from money I have saved from pre-tax dollars. Believe me this will turn into a major pain for all parties involved!

  5. Then we have the rest of the story…Organizations across the board say the current number of doctors will not be able to absorb xx million more new insured pretty much guaranteeing longer times between the phone call and the appointment. The government is adding to this nightmare scenario by making us use a doctors appointment time get a script for an OTC pill. Due to liability would any doctor write a script for OTC without seeing the patient on the off chance their headache is a brain hemmorage??

  6. I appreciate the answers. Seems like a long stretch for avoiding fraud, and I know a lot more people who would try to run a scam with controlled substances… I can get my own tylenol and benadryl… It also seems to be out of line with the intent of both the FSA and the reform bill. However, I assume that most people will just take the dollar difference of purchasing their tylenol with taxed dollars. I know I plan on it, and I see a lot of employees who don’t always think to utilize their FSA for every small purchase.

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