FSA Paybacks Now Cover Non-Prescription Drugs

September 3, 2003 (PLANSPONSOR.com) - Workers at companies with a health care flexible spending account (FSA) who have to pick up an antacid for an upset stomach or an over-the-counter antihistamine for allergies can now use pre-tax FSA dollars for those purchases.

>That was the upshot of an announcement Wednesday by the US Treasury Department and the Internal Revenue Service (IRS) opening up use of the increasingly popular workplace health benefit programs.

>According to a news release, Revenue Ruling 2003-102 clarifies that employer reimbursements of employee health expenses that are for nonprescription drugs, including reimbursements through health FSAs and Health Reimbursement Arrangements (HRAs), are excluded from income like other employer reimbursements of employee health expenses.

>The Treasury/IRS announcement said officials were making the change to recognize the increasing number of formerly prescription drugs now being released on the open over-the-counter market such as the popular antihistamine Claritin.

“Flexible Spending Accounts are an important tool in helping people meet their health care costs,” Treasury Secretary John Snow said in a statement. “Since many prescription drugs have moved to the over-the-counter market, this action today makes paying for them a little bit easier to swallow.”

The only specific exception mentioned in the announcement not covered by the new rule are dietary supplements.

“Many health plans no longer cover the cost of these drugs as over-the-counter.  While an over-the-counter drug is less expensive than the prescription drug, the cost to many consumers increases because the price paid by the consumer for the over-the-counter drug is greater than the co-payment by the consumer when the drug was covered by insurance,” the announcement said. “This is especially an issue for individuals who remedy chronic health problems by regularly taking an over-the-counter medicine.”

For more information, go to http://www.treas.gov/press/releases/js695.htm .