FSA and HRA debit card use revised
Thursday, January 13th, 2011
You can use your FSA or HRA debit card to buy over-the-counter medicine with a prescription after January 15. As I mentioned in a previous post on this topic, the Affordable Care Act revised rules for HRA, medical FSA, and HSA plans regarding over-the-counter medicines. A prescription is required for these medicines (except insulin) to be reimbursable under the plans. That rule took effect on January 1, 2011, and is still in place.
Many of these plans issue debit cards for their participants to use to pay for medical costs allowed under the plans (check your plan documents for details). The IRS originally declared that debit cards could not be used to buy over-the-counter medicines even with a prescription. They have now relented. In essence, the new guidance says that pharmacies must handle prescriptions for over-the-counter meds the same way they handle all other prescriptions. In practical terms, this means you will need to get a prescription from your doctor for your over-the-counter meds and present the prescription to the pharmacist when you buy them. After January 15, 2011, you may pay for these meds with your FSA or HRA debit card.
Here’s an interesting point that we have not seen discussed yet: Under the rules for the itemized deduction for medical expenses, non-prescription medicine is not deductible. If you now have a prescription for over-the-counter medicine, does that make it deductible even though it is available without a prescription? We think probably so, and we’ll be monitoring guidance, as always.