Congressman, groups fight to delay FSA provision

Facing a Jan. 1 effective date, industry groups and Democratic Congressman Earl Pomeroy are urging the U.S. Treasury to immediately clarify a new health reform law that will change the way over-the-counter drugs can be purchased with tax-advantaged spending accounts like FSAs.

The impending law will require consumers to obtain a physician's prescription before they can buy OTC medication using their flexible spending account, health spending account, health reimbursement account or Archer Medical Savings Account (the purchase of insulin is excluded).

The provision will take effect soon, but groups say the new regulation is still fuzzy on certain compliance issues. For example, according to an industry group responsible for establishing standards for electronic payment processing for HSAs, the law currently states that only "prescribed" OTC drugs are eligible for reimbursement; however, it does not specify whether a prescription is required or if a letter of medical necessity will suffice.

"Without clarification on the type of permission needed for FSA reimbursement for OTC drugs, consumers, retailers and third party administrators will be confused and unlikely to fully comply with the new regulations by the start of new year. Meanwhile, we're likely to see doctor's offices overwhelmed with patients seeking prescriptions to use their spending accounts for Claritin, Zyrtec and other OTC items," says Jody Dietel, president and chair of the Special Interest Group for Inventory Information Approval System Standard. "A delay in implementation will provide time for all parties to be better educated on the issue and prepared to comply with the new rules."

In his letter to U.S. Treasury Secretary Timothy Geithner, Congressman Pomeroy says benefits administrators are concerned about challenges they face to make system changes before the fast-approaching deadline. In particular, administrators and retail merchants may have to suspend their electronic systems in mid-November to make updates or wait until the end of the year. "Under either scenario," Pomeroy says, "consumers are left confused and frustrated and benefit administrators and retail merchants will be left with increased processing and consumer service costs."

Grassroots advocate Save Flexible Spending Plans has pushed for a 2014 implementation date to coincide with the start date of many other provisions under the Patient Protection and Affordable Health Care Act. "This common-sense approach would provide a much better transition period for participants, including those battling chronic conditions, to be educated about the new rules and have a reasonable amount of time to find new ways to finance their health care costs," the group said in a statement released in March.

"This restriction will hurt millions of consumers who rely on their FSAs to manage their out of pocket health care costs and pay for necessary over-the-counter therapies," notes Joe Jackson, CEO of WageWorks Inc., a benefits company based in San Mateo, Calif. "If Congress is intent on putting this provision into effect, they should at least push back the deadline so that consumers and especially retailers are ready for the transition."

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