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Welcome to Health Care Reform Demystified. Today’s episode: Acronyms Are Us – FSA, HRA, HSA Changes in the Affordable Care Act.
To get an idea of just how much and how fast technology has advanced over the past 50 years, look no further than the humble telephone. Remember when they looked like this [black rotary telephone]?
However, what technology giveth in the form of gadgetry, it taketh away in patience.
Between wireless phones, text messages, emails, and instant messaging, we don’t want to wait for anything anymore. Even instant gratification takes too long.
And that’s why we love acronyms. Acronyms let us whittle down unwieldy expressions like “as soon as possible” to the much snappier A.S.A.P. – or even ASAP. Americans love these handy abbreviations so much, we tend to “acronym” everything in sight.
Which brings us ‘round to health care. One thing that makes the Patient Protection and Affordable Care Act or PPACA seem complicated is that it’s awash in acronyms, abbreviations, and other industry terms.
A peach of an example change is the bit dealing with changes affecting health spending accounts like flexible spending accounts, a k a FSAs, health reimbursement accounts, i.e., HRAs, and health savings accounts, e.g., HSAs. Especially as they apply to over-the-counter medications, or OTCs. [Speaker holds up sign with “OMG.”]
The thing is, once you descend from the top of Mount Jargon and bring things down to a more practical altitude, it’s really pretty simple. Let’s start with the basics. In the past, you could use various types of health accounts – an FSA, HSA, HRA – to buy over-the-counter medications like pain relievers, allergy medications, and cold and flu medicines.
But as of January 1, 2011 you need a prescription for these items to qualify for reimbursement. You can still use these accounts to pay for insulin and blood sugar test kits, contact lens supplies, bandages, and durable medical equipment such as wheelchairs crutches or hospital beds. But for the most part, for over-the-counter medications, no prescription, no reimbursement.
Health accounts often come with a debit card you can use to pay for health services and medications. For all debit card purchases of prescribed, over-the-counter medications, the simple rule is: save your receipt. You’ll need it for both reimbursement and tax purposes.
Now there are some differences between the 3 types of accounts, especially in regard to dependent coverage. Employers with FSA and HRA accounts may, but are not required, to allow reimbursement of eligible expenses for adult children through age 26. But for HSAs. the adult child must still be considered a tax dependent in order for their medical expenses to qualify for reimbursement.
Now that we’ve made our way through the acronym obstacle course, let’s review some of the highlights as well as a few additional items to note. Purchases of over-the-counter medications are reimbursable by HSAs, HRAs, and FSAs only when prescribed by a doctor. These accounts can still be used to pay for items such as:
- Insulin and blood sugar test kits
- Contact lens supplies
- Bandages and dressings
- Durable medical equipment like wheelchairs, crutches, and hospital beds
When using a health account for prescribed over-the-counter purchases, you must:
- Keep all receipts for reimbursement and tax purposes
- If you pay out of pocket for prescribed over-the-counter medications, you can submit a claim for reimbursement. You must include a copy of your receipt and the prescription.
- You can use your debit card to pay for prescribed over-the-counter medications at the pharmacy.
As of January 1, 2011, if you use your health savings account for non-qualified medical expenses, the penalty increased to 20 percent. Today, there are no standard limits to the amount an employee can contribute to a Flexible Spending Account, though most employers limit contributions to below $5,000.
If you’re taking advantage of your employer’s current maximum, you may see a reduction in the amount you’re able to save in the future. Employers will need to revise their plan’s summary documents to comply with the health reform law.
Just like acronyms, the provisions of the Affordable Care Act can help you if you know how they affect your business and your employees. And speaking of help, here are some more handy acronyms for you: [Speaker holds up cards: 2G2BT = too good to be true, 4EAE = forever and ever, IDF = I don’t know, TTYL = talk to you later]
You can learn more about changes to FSAs, HRAs, HSAs, and other important topics on the United for Reform website [uhc.com/reform]. And as always, contact your broker or UnitedHealthcare representative with any questions about your plan.
[Aside, on phone] I need that sandwich ASAP, A.S.A.P. You know what I’m sayin’? ASAP? As soon as possible? Oh, good!
