Does the new health care legislation prohibit FSA's from being used to purchase OTC drugs?
July 8, 2010 9:10 AM
Does the new health care legislation prohibit FSA's from being used to purchase OTC drugs?
No partisan flame wars, please. I'm just trying to find out whether or not the new health care law just passed by Congress prohibit the use of FSA's to pay for OTC drugs like Tylenol, Advil, etc. Yes/no and links to valid (i.e. non-partisan) sources would be welcome.
I've been searching online, but my Google-fu is not working today.
No partisan flame wars, please. I'm just trying to find out whether or not the new health care law just passed by Congress prohibit the use of FSA's to pay for OTC drugs like Tylenol, Advil, etc. Yes/no and links to valid (i.e. non-partisan) sources would be welcome.
I've been searching online, but my Google-fu is not working today.
Thanks, ThePinkSuperhero. Unfortunately, the site you linked to is for a members-only trade association. Is there a publicly available source?
posted by zooropa at 9:25 AM on July 8, 2010
posted by zooropa at 9:25 AM on July 8, 2010
No links, but I was told by my employer during our recent open enrollment that OTC drugs would not be eligible for FSA in 2011.
posted by rabbitrabbit at 9:27 AM on July 8, 2010
posted by rabbitrabbit at 9:27 AM on July 8, 2010
PS: I just did a google search for ["Flexible spending account" otc 2011] (remove brackets) and came up with a bunch of stuff...
posted by rabbitrabbit at 9:30 AM on July 8, 2010
posted by rabbitrabbit at 9:30 AM on July 8, 2010
Huh, that's really strange- when I linked to it, I was able to read the whole thing.
posted by ThePinkSuperhero at 9:38 AM on July 8, 2010
posted by ThePinkSuperhero at 9:38 AM on July 8, 2010
I like this secondary source (scroll to the bottom of 2011, tax provisions):
http://www.kff.org/healthreform/8060.cfm
Here's the statutory language:
SEC. 9003. DISTRIBUTIONS FOR MEDICINE QUALIFIED ONLY IF FOR PRESCRIBED DRUG OR INSULIN.
(a) HSAS.— Subparagraph (A) of section 223(d)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following: Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin..
(b) ARCHER MSAS.— Subparagraph (A) of section 220(d)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following: Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin..
(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT ARRANGEMENTS.— Section 106 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED TO PRESCRIBED DRUGS AND INSULIN.— For purposes of this section and section 105, reimbursement for expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin..
(d) EFFECTIVE DATES.—
(1) DISTRIBUTIONS FROM SAVINGS ACCOUNTS.— The amendments made by subsections (a) and (b) shall apply to amounts paid with respect to taxable years beginning after December 31, 2010.
(2) REIMBURSEMENTS.— The amendment made by subsection (c) shall apply to expenses incurred with respect to taxable years beginning after December 31, 2010.
posted by Pax at 9:44 AM on July 8, 2010
http://www.kff.org/healthreform/8060.cfm
Here's the statutory language:
SEC. 9003. DISTRIBUTIONS FOR MEDICINE QUALIFIED ONLY IF FOR PRESCRIBED DRUG OR INSULIN.
(a) HSAS.— Subparagraph (A) of section 223(d)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following: Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin..
(b) ARCHER MSAS.— Subparagraph (A) of section 220(d)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following: Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin..
(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT ARRANGEMENTS.— Section 106 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED TO PRESCRIBED DRUGS AND INSULIN.— For purposes of this section and section 105, reimbursement for expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin..
(d) EFFECTIVE DATES.—
(1) DISTRIBUTIONS FROM SAVINGS ACCOUNTS.— The amendments made by subsections (a) and (b) shall apply to amounts paid with respect to taxable years beginning after December 31, 2010.
(2) REIMBURSEMENTS.— The amendment made by subsection (c) shall apply to expenses incurred with respect to taxable years beginning after December 31, 2010.
posted by Pax at 9:44 AM on July 8, 2010
Doesn't this mean that, if your doctor prescribes Advil or Maalox, then the costs of purchasing those drugs would be covered?
posted by amtho at 9:47 AM on July 8, 2010
posted by amtho at 9:47 AM on July 8, 2010
Doesn't this mean that, if your doctor prescribes Advil or Maalox, then the costs of purchasing those drugs would be covered?
That's what the committee report says, but I wouldn't be surprised if the guidance (if there is any) takes a different stance. In any case, OTC meds are a relatively small proportion of what people use FSAs for (as opposed to co-insurance and expensive Rx drugs). I personally think that allowing Rx for Advil to be covered would subvert the purpose of the provision (should a person who happens to gets a Rx from their doc for something they didn't need a Rx be favored over a person who didn't pay to go to the doc - or doesn't even have an FSA?).
Committee Report
Distributions for medicine qualified only if for prescribed drug or insulin.
, , , Code Sec. 223, 220, 106, 105
Joint Committee on Taxation Report
Explanation of Provision
Under the provision, with respect to medicines, the definition of medical expense for purposes of employer-provided health coverage (including HRAs and Health FSAs), HSAs, and Archer MSAs, is conformed to the definition for purposes of the itemized deduction for medical expenses, except that prescribed drug is determined without regard to whither the drug is available without a prescription. Thus, under the provision, the cost of over-the-counter medicines may not be reimbursed with excludible income through a Health FSA, HRA, HSA, or Archer MSA, unless the medicine is prescribed by a physician.
posted by Pax at 10:40 AM on July 8, 2010
That's what the committee report says, but I wouldn't be surprised if the guidance (if there is any) takes a different stance. In any case, OTC meds are a relatively small proportion of what people use FSAs for (as opposed to co-insurance and expensive Rx drugs). I personally think that allowing Rx for Advil to be covered would subvert the purpose of the provision (should a person who happens to gets a Rx from their doc for something they didn't need a Rx be favored over a person who didn't pay to go to the doc - or doesn't even have an FSA?).
Committee Report
Distributions for medicine qualified only if for prescribed drug or insulin.
, , , Code Sec. 223, 220, 106, 105
Joint Committee on Taxation Report
Explanation of Provision
Under the provision, with respect to medicines, the definition of medical expense for purposes of employer-provided health coverage (including HRAs and Health FSAs), HSAs, and Archer MSAs, is conformed to the definition for purposes of the itemized deduction for medical expenses, except that prescribed drug is determined without regard to whither the drug is available without a prescription. Thus, under the provision, the cost of over-the-counter medicines may not be reimbursed with excludible income through a Health FSA, HRA, HSA, or Archer MSA, unless the medicine is prescribed by a physician.
posted by Pax at 10:40 AM on July 8, 2010
Payflex administers the FSA I am enrolled in and they have a notice on their site:
Legislation Impacts Over-the-counter (OTC) Items on January 1, 2011
The latest health care reform bills, the Patient Protection and Affordable Care Acts were signed into law in March, 2010 by President Obama. This new legislation impacts how OTC medicines and drugs are treated with respect to your healthcare savings or flexible spending account beginning January 1, 2011. Specifically, OTC drugs and medicines will be considered ineligible beginning January 1, 2011 unless you have a prescription from your physician.
There's also a more detailed PDF listing the types of OTC drugs that aren't eligible without a prescription.
posted by kathryn at 1:29 PM on July 8, 2010
Legislation Impacts Over-the-counter (OTC) Items on January 1, 2011
The latest health care reform bills, the Patient Protection and Affordable Care Acts were signed into law in March, 2010 by President Obama. This new legislation impacts how OTC medicines and drugs are treated with respect to your healthcare savings or flexible spending account beginning January 1, 2011. Specifically, OTC drugs and medicines will be considered ineligible beginning January 1, 2011 unless you have a prescription from your physician.
There's also a more detailed PDF listing the types of OTC drugs that aren't eligible without a prescription.
posted by kathryn at 1:29 PM on July 8, 2010
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posted by ThePinkSuperhero at 9:12 AM on July 8, 2010