The Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed into law in March 2020 removed the prescription requirement for items eligible to be reimbursed through HSAs and FSAs.
In short, this means you can use your HSA or FSA to reimburse yourself for qualifying over the counter (OTC) medications, if you have a debit card associated with your account you can use the card to pay for these items directly, or you can save your receipts to submit claims for reimbursements. Purchases do not have to be COVID-related.
Before the CARES Act went into effect, OTC medications could only be reimbursed if they were prescribed by a doctor. This change is effective beginning January 1, 2020 and for the 2020 year only (unless Congress extends).
Eligible expenses include, but are not limited to:
- Face masks
- Cold, cough, and flu medicine
- Pain relievers and anti-inflammatory medicine
- Allergy and sinus medicine
- Sleep aids
- Digestive aids and laxatives
- Baby rash ointments and creams
- Skin treatments
- Acid controllers
The Special Interest Group for IIAS Standards (SIGIS) have set guidelines used to determine which OTC medications qualify as a medical expense. Their list of eligible categories is updated monthly.
FSAs and HSAs
FSAs and HSAs were created 50 years ago to help people save for medical costs by setting aside money into a pretax account to pay for medical expenses with this untaxed income. An FSA is an account offered by an employer used to pay for out-of-pocket medical expenses like insurance copays, prescriptions, and related products or services. An HSA is only available with a high deductible health plan, and the funds can pay for a variety of medical costs.
FSA funds are typically lost if not used by the end of the year, while HSA funds generally have no expiration date. Americans who determined FSA contributions before the coronavirus pandemic may have extra funds available as a result of cancelled dental or other medical appointments. The coverage of unprescribed medical expenses under the CARES Act may allow otherwise forfeited FSA funds to be used.
This expansion to cover OTC medications benefits both consumers and the US healthcare system. OTC medications provide suitable treatments for common illnesses or conditions, allowing doctor’s offices, emergency rooms, and urgent care providers to focus on the current health crisis.