Healthcare Reform October Update

A considerable amount of attention has been given to the healthcare reform regulations that extend coverage for children to age 26, and the IRS section 105 non-discrimination rules that previously applied to self-insured plans, but will now also apply to fully-insured plans as well.

The new regulations relating to preventive care and FSA coverage of over-the-counter medications have escaped notice due to the attention given the topics mentioned above.

Preventive Care

New and non-grandfathered plans renewing on or after September 23, 2010 must cover preventive services without a co-payment, deductible or co-insurance when these services are delivered by in-network providers. Most plans currently cover preventive benefits to some extent, but in addition to mandating that preventive care is covered in full, the Affordable Care Act broadens the scope and definition of services which must now be covered.

Some questions still exist concerning exactly when a particular service will be considered preventive, thus requiring coverage with no cost-sharing, and when a service will be considered treatment subject to regular plan deductibles and copays. For example the list of preventive services includes “Alcohol Misuse screening and counseling.” Clearly a visit and/or a counseling session with a provider where a patient’s alcohol abuse is discussed and the provider recommends treatment would be considered preventive, but once the individual receives medical treatment for that condition, the costs would be subject to regular plan cost sharing. When exactly the care shifts from “preventive” to “treatment” is still being worked out by carriers and health plans.

A comprehensive list of preventive services that must be included is provided here.

Flexible Spending Accounts and Over the Counter Medications

Beginning January 1, 2011, over-the-counter (OTC) medicines will no longer be eligible expenses under Flexible Spending Accounts (FSA), unless prescribed by a doctor. OTC medicines, which include items such as aspirin, ibuprofen, antihistamines, etc., will need appropriate documentation from a doctor in order to be reimbursed by an FSA. Prescription drugs, insulin and other OTC healthcare related products, like blood pressure monitors, bandages, and first aid kits, continue to be eligible expenses. (It should be noted that the same rules apply to HSAs and HRAs).

In short, this change only applies to OTC medicines and becomes effective January 1, 2011 even if you are in the middle of your current plan year (such as plans that began on July 1, 2010 and end on June 30, 2011).

Since the majority of health FSA claims stem from medical treatments and prescriptions, the financial impact to the FSA participant should be fairly minimal –only about 10% of FSA claims are generated from OTC expenses. However, the confusion impact could be substantial. Participants will need to be made aware of this change during the open enrollment period so they don’t overestimate their FSA elections for their 2011 plan. Finally, and importantly, participants who use a Benny card will also need to be informed that the card can no longer be used to purchase OTC medicines; they will have to submit prescriptions and receipts for these items.

By Reimer Douglas, Account Executive

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