Home / News / Over-The-Counter Medicine Reimbursement and Non-discrimination Testing for Insured Plans

News

Over-The-Counter Medicine Reimbursement and Non-discrimination Testing for Insured Plans

What You Need to Know Now About:  Revised - Over-The-Counter Medicine Reimbursement and Non-discrimination Testing for Insured Plans.

On December 23, 2010, the Internal Revenue Service (IRS) issues two notices, 2011-5 and 2011-1, revising administrative rules for two health care reform provisions:  Over-The-Counter Medicine Reimbursement and Non-discrimination Testing for Insured Plans.

Over-The-Counter (OTC) Medicine Reimbursement

As detailed in our Health Care Reform Update regarding OTC Medicine Reimbursement released on 08/04/2010, effective January 1, 2011 OTC medicine purchased after that date is no longer eligible to be reimbursed through a Flexible Spending Account (FSA), Health Reimbursement Account (HRA) or Health Savings Account (HSA) unless accompanied by a prescription or medical necessity statement from a medical provider.  At that time, administrative guidelines stated that a participant could not use an FSA, HRA, HSA debit card for reimbursement for OTC medicine.  Since a copy of the prescription or medical necessity statement would need to accompany any claims it would need to be done manually.

On December 23, 2010, the IRS issued 2011-5 stating that effective after January 15, 2011, a debit card could still be used for OTC medicine reimbursement through an FSA or HRA provided:

1. The prescription or medical necessity statement is presented to the pharmacist (in any format);
2. The OTC medicine is dispensed according to applicable laws and regulations; and
3. An Rx number is assigned.

The pharmacy is then responsible for maintaining records of the transactions that meet IRS rules and regulations.  Not all pharmacies and/or FSA administrators may be participating in the program.  You should first check on participation and also with your FSA administrator on what OTC medicines are eligible for reimbursement using your debit card. 

Also, the records must be available for review by the employer, or agent, on request.   As always, you must also keep a copy of your records for tax purposes.

Non-discrimination Testing for Insured Plans

The Patient Protection and Affordable Care Act  (“Health Care Reform Act”) also expanded IRS Section 105(h) Non-discrimination Testing to insured plans.  Self-funded plans were already subject to the IRS Section 105(h) testing.  The testing for insured plans was to begin effective with the first day of the next plan year after 09/23/2010; however, additional guidance on the administration of the regulation from the Department of Labor (DOL) is still needed.  As a result, the implementation of this provision of the Health Care Reform Act has been delayed as detailed in IRS Notice 2011-1.  The DOL is taking comments on this provision up until 03/11/2011 and is expected to release final regulations shortly thereafter.

As more guidance is provided by the DOL, Banyan Consulting will provide additional information to you.

If you have any questions on  any health care reform provisions, please contact a member of your Banyan Consulting team.