Changes to HSAs
The Patient Protection and Affordable Care Act includes a number of changes to the rules that currently apply to Flexible Savings Accounts (FSAs), Health Reimbursement Accounts (HRAs), and Health Savings Accounts (HSAs).
Effective January 1, 2011
Beginning in 2011, the definition of a “qualified medical expense” will be altered to no longer include over-the-counter medications unless they are prescribed by a physician. Therefore, items such as aspirin will no longer be considered as a “qualified medical expense,” and therefore will not be reimbursable from an FSA or HRA or be treated as a non-taxable medical expense under an HSA, unless pursuant to a prescription. The following lists provide examples of medications that may now require a doctor’s prescription in order to be considered an IRS eligible qualified medical expense.
Acid controllers
Allergy and sinus
Antibiotic products
Anti-diarrheal
Anti-gas
Anti-itch and insect bite
Anti-parasitic treatments
Baby rash ointments and creams
Cold sore remedies
Digestive aids
Hemorrhoid preps
Laxatives
Motion sickness pills
Pain relief such as aspirin
Respiratory treatments
Sleep aids and sedatives
Stomach remedies
Items such as bandages, home health-aids and other over-the-counter items may still be qualified medical expenses. For example, the following items will remain available without a physician’s prescription.
Artificial teeth
Birth control
Braces and supports
Braille books and magazines
Catheters
Contact lens supplies and solutions
Denture adhesives
Diagnostic tests and monitors
Elastic bandages and wraps
Band-Aids and other first aid supplies
Hearing aids and batteries
Insulin and diabetic supplies
Ostomy products
Oxygen and oxygen-equipment
Pregnancy test kits
Reading glasses
Wheelchairs
In addition, beginning in January 2011, the penalty for using HSA funds for nonqualified medical expenses will increase from 10% to 20%.
Effective January 1, 2013
Beginning in 2013, individuals will only be able to contribute $2,500 a year to their FSA. This amount will be indexed for inflation in subsequent years.