A Division of RPS Plan Administrators
On Friday, September 3, 2010, the IRS issued its initial guidance with respect to the new rule included in the Affordable Care Act that requires a doctor’s prescription for the reimbursement of over-the-counter (OTC) drug and medicines from a tax-advantaged health care account. While the guidance offers little in the way of new information, it does confirm the generally accepted interpretation of how the change will be applied. Please see the attached letter from SIGIS, most of which is excerpted here.
In summary, the guidance confirms the following:
- Participants will still be able to use their tax advantaged health care accounts for purchases of ALL OTC drugs and medicines, as long as they have a doctor’s prescription.
- The rule applies to all tax-advantaged health care accounts, including Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs) and Archer Medical Savings Accounts (Archer MSAs).
- The rule takes effect January 1, 2011 and applies to purchases on or after January 1, 2011, regardless of plan year.
- The only acceptable form of documentation for reimbursement for OTC drugs and medicines is a doctor’s prescription, as regulated by state law.
- Insulin, medical devices (crutches, blood sugar monitors, etc.) and items such as bandages, contact lens solution, denture bond, etc. remain eligible and will not require a prescription.
- The guidance allows for a 15-day enforcement delay until 1/16/2011 for card transactions (they’ll be assumed to qualify until that day). This is to allow merchants time to implement the new eligible product list.
The IRS has posted additional details, including a helpful FAQ, about the OTC rule change on its Affordable Care Act website and includes links to the following:
- Text of IR-2010-95 is available at http://www.irs.gov/irs/article/0,,id=227301,00.html.
- Text of Rev. Rul. 2010-23 is available at http://www.irs.gov/pub/irs-drop/rr-10-23.pdf.
- Text of Notice 2010-59 is available at http://www.irs.gov/pub/irs-drop/n-10-59.pdf.
- Text of Affordable Care Act: Questions and Answers on Over-the-Counter Medicines and Drugs is available at: http://www.irs.gov/newsroom/article/0,,id=227308,00.html.
In terms of the impact to the SIGIS IIAS standard, SIGIS is still in the process of evaluating the latest guidance and will communicate any changes to the standard or best practices over the coming weeks. One item that needs clarification from SIGIS is how a prescribed OTC medicine or drug will be handled with respect to the standard. For instance, will it deny or will it approve as part of the RX total? As we receive more information we will communicate it.
If you have any questions or need additional information, please contact us at 1-800-651-4855 x 5
8 Responses to “IRS Guidance For 2011 OTC Changes”
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Will diapers, baby wipes, etc. for mentally challenged or autistic adults still be covered?
Yes, these changes only effect Over-the-Counter Medicines and Drugs (and you can still get them with a prescription from your doctor).
If contact lenses are prescribed, how do the new OTC regs cover contact lens solutions?
Great question Susan. The new OTC rules are only for OTC medicines and drugs so Contact Solution is still an eligible expense that does NOT require a prescription and you will still be able to pay for it using your 24HourFlex card. For a list of items that will still be eligible without a prescription see our updated Eligible Expenses List.
re: otc : dietary supplements covered…vitamines for example?
Hi David – Dietary supplements are only covered if you get the doctor to fill out a letter of medical necessity (can be round on our “Forms” page here) for the supplements. Vitamins are typically not covered as they are for general health (in most instances) but they could be prescribed for the prevention, treatment, or cure of a specific disease or illness.
Staff,
Is a blood pressure monitor covered or do we need a doctor’s prescription for reimbursement for flexcash?
Is there a list of medical devices covered for purposes of reimbursement?
My employer is the City and County of Denver.
Thank you.
Hi Alberto – A blood pressure monitor will be covered without a doctor’s prescription.