Over-the-counter drugs and medicines are again eligible for FSAs/HSAs/HRAs without a prescription

The CARES Act, a landmark stimulus law passed by Congress today, includes a provision that will benefit participants in Health Flexible Spending Accounts (“FSAs”), Health Savings Account (“HSA”) bank accounts, and certain Health Reimbursement Arrangements (“HRAs”). The CARES Act repeals a rule from the 2010 Affordable Care Act that disallowed tax-free reimbursement of over-the-counter drugs or medicines (collectively “OTC”) without a prescription. This was an unpopular change that removed a tax break for employees beginning in 2011.

With this development, Health FSAs and HSAs can again cover OTC without prescriptions. Eligible OTC includes any drugs or medications that are primarily for treatment (not cosmetic or for general health). Most medical devices and supplies are already eligible without prescription, so there is no change with respect to those.

For FSA plans that we administer and HSA accounts that we support, this change is effective immediately. We are making and confirming necessary changes for cards, systems, and processes to implement the change, and will provide additional practical details soon.

For HRA plans that include all IRS-allowed out-of-pocket medical/dental/vision expenses, those plans will immediately allow OTC coverage. Other types of HRA plans that define eligible expenses more narrowly will be unaffected by the change. Examples include deductible or coinsurance/OOP reimbursement plans.