Note: None of this should be taken as legal or tax advice.
Experts suggest that employers' use of consumer-driven health plans has increased due to rising health insurance costs.
What do you think?
Note: None of this should be taken as legal or tax advice.
The IRS recently released
Notice 2010-59 providing guidance on the Affordable Care Act provisions that changed the substantiation requirements for over-the-counter (OTC) drugs. These changes apply to
flexible spending accounts (FSAs),
health reimbursement arrangements (HRAs) and
health savings accounts (HSAs).
Beginning January 1, 2011, the following substantiation for OTC medicines and drugs will be required:
- a receipt that identifies the purchaser along with an RX number, or
- a receipt showing the item purchased along with a copy of the prescription.
A doctor's prescription is defined as a document that meets the legal requirements of a prescription in the state in which the medical expense is incurred. It also must be issued by an individual who is legally authorized to write a prescription in that state.
According to the Special Interest Group for IIAS Standards (SIGIS), approximately
one-third of the IIAS list will no longer be payable with an HRA debit card.
This further complicates an already confusing experience for HRA debit-card holders...
- If the card-holder visits an IIAS-qualified Pharmacy, then the card-holder can use the debit card to purchase prescription drugs only. The card-holder cannot use the debit card to purchase OTC medicines and drugs that require a prescription.
- If the card-holder visits a non IIAS merchant (e.g. doctor, hospital, non-IIAS-qualified pharmacy etc.), then the card-holder must manually submit documentation (e.g. receipt) to confirm the items purchased were eligible expenses.
Note: None of this should not be taken as tax or legal advice. Yesterday, the IRS issued
Notice 2010-59 giving guidance on the new tax treatment of over-the-counter (OTC) drugs with regard to
HRAs,
FSAs, and
HSAs.
The notice clarified that:
- A doctor's prescription is required for over the counter drugs the same way prescriptions are required for prescription drugs (i.e. substantiation would include a receipt that identifies the purchaser along with an Rx number or a receipt showing the item purchased along with a copy of the prescription).
- The new prescription requirements do not apply to insulin, equipment (e.g. crutches), supplies (e.g. band aids), or diagnostic devices that are not medicines or drugs.
- The IRS will permit documents to be amended no later than June 30, 2011.
- Debit cards cannot be used at all providers and merchants to purchase over-the-counter medicines or drugs.
Effective September 23, 2010, the
health reform bill prohibits group health insurance plans from imposing
lifetime limits on
essential health benefits. However, plans may impose certain
annual limits on essential health benefits until January 1st, 2014. This new requirement applies to plans with effective dates of coverage on September 23, 2010 or later.
The annual limits restrictions phase in over the next few years as follows:
- Phase 1 (September 23, 2010 through September 22, 2011) - $750,000 maximum per participant
- Phase 2 (September 23, 2011 through September 22, 2012) - $1,000,000 maximum per participant
- Phase 3 (September 23, 2012 through December 31, 2013) - $2,000,000 maximum per participant
- Phase 4 (January 1st, 2014 Year 5 and beyond) - no annual limit allowed
Health Reimbursement Arrangements (HRAs)
Flexible Spending Accounts (FSAs)
Health Savings Accounts (HSAs)
