More than six months have passed since President Barack Obama signed the health care reform bill into law. A number of provisions are now in effect, and federal agencies are working to clarify lingering questions in the legislation.
One aspect that could have a significant impact on employers and employees — reimbursement for medical expenses from flexible spending accounts (FSAs), health savings accounts (HSAs), Archer medical savings accounts (MSAs) and health reimbursement arrangements (HRAs) — has received special attention from the IRS.
In late September, the IRS posted new guidance regarding reimbursement for over-the-counter (OTC) drugs under the Patient Protection and Affordable Care Act (PPACA). According to a report in PLANSPONSOR, the agency states that expenses for OTC drugs will be considered reimbursable on or after Jan. 1, 2011, only if:
1. A prescription is required to obtain the medicine or drug;
2. The item is available as an OTC drug, but an individual has obtained a prescription for it; or
3. The drug is insulin.
The guidance, however, still begs for more clarity, experts say. For instance, many consumers might not understand what constitutes a prescription. According to a report in Employee Benefit News, a prescription is defined as “an electronic or written order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred, and that is issued by an individual authorized to issue a prescription in that state.” In other words, if a doctor simply tells a patient “Take two aspirin,” a purchase of OTC aspirin is not reimbursable under PPACA because no formal prescription is issued.
Also, the definition of a “medicine or drug” remains foggy. For instance, the new law still permits reimbursements for some medical supplies and diagnostic devices, such as contact lens solution and blood sugar test kits. However, the recent guidance doesn’t give much detail on what actually constitutes a “medicine or drug.”
Although many questions remain, attorneys from Alston & Bird suggest employers start communicating what they know now to plan participants and touch base with their third-party administrators (TPAs) and debit card issuers to make sure the regulations will be followed come Jan. 1, 2011. Employers also should create a new process to ensure that every claim for an OTC medicine or drug has a valid prescription number or otherwise satisfies a state’s prescription requirements.
More from the DOL
The Department of Labor (DOL) also recently issued some guidance regarding provisions in PPACA. The DOL relaxed some previous rules on how health care plans handle disputed claims and answered some questions on the expansion of medical coverage to an employee’s adult children.
The law allows employees covered under self-insured plans to request a “federal external review” following a claims denial through internal reviews by employers and administrators, according to a report in Business Insurance. Previous rules required employers to contract with at least three different independent review organizations and to shift cases among them. In the recent guidance, however, the DOL states that employers do not have to contract directly with the review organizations, but instead can obtain those services through a TPA.
The DOL also clarified a provision that extends an employee’s health coverage to his or her adult children up to age 26 without restrictions as of Jan. 1, 2011. The DOL states employers who voluntarily extend benefits beyond adult children (such as nieces, nephews and grandchildren) can continue to impose restrictions or conditions, such as requiring “the individual be a dependent for income tax purposes,” according to the Business Insurance report.