Health Care Reform changes starting January 1, 2011

HR Concepts strives to keep our clients and partners informed with the most up to date information as it relates to Health Care Reform. HRC has provided various updates to parts of the reform as it relates to Section 125, Flexible Spending Accounts (FSA), and Health Reimbursement Arrangements (HRA). This HRC Insider was written to address the various questions that HRC has been receiving regarding the final changes to these plans as of today.


As a part of the Patient Protection and Affordable Care Act signed into law on March 23, 2010 there are changes to the classification of OTC eligible expenses for reimbursement from flexible spending accounts, health reimbursement arrangements and health savings accounts that limit the list to a few items unless a doctor provides a prescription for OTC expenses. Additional changes include required health coverage for children under age 26, tax favored health coverage for children under 27, and the reduction of maximum FSA contributions starting January 1, 2013.  HRC is committed to providing accurate and relevant information as it pertains to these changes and the impact upon the administration of these services.

OTC reimbursement eligibility

Due to the new health care reform legislation, over-the-counter (OTC) drugs, medicines and biologicals will be eligible for reimbursement only if the request is accompanied by a doctor's prescription. As of January 1, 2011 a doctor's prescription submitted along with the reimbursement request will be required in order to be reimbursed for such expenses as pain relievers, allergy medicines, or diaper rash creams for example. One exception to this is the use of insulin will remain eligible as a tax-free reimbursement without a prescription. Please refer to the list below for additional information on how this will impact your flexible spending account plan.

Please be aware this change in eligible OTC will be effective January 1, 2011. The change to OTC will apply to all plans, regardless of when the plan was effective. Therefore, this will affect all plans and participants at the same time regardless of the plan year start date. Expenses incurred on and after January 1, 2011 will require a doctor's prescription, however OTC expenses incurred prior to January 1, 2011 will still be eligible.

This change will also impact how participants use their HRC Total Access Card. OTC purchases will no longer be eligible for payment using their Total Access Card as of January 1, 2011. HRC is still in the process of clarifying the specific list of items affected and we will provide participants a list of affected items closer to the effective date. The current list of affected items includes the following items:

  • Acid Controllers
  • Allergy & Sinus
  • Antibiotic Products
  • Anti-Diarrheals
  • Anti-Gas
  • Anti-Itch & Insect Bite
  • Anti-parasitic Treatments
  • Baby Rash Ointments/Creams
  • Cold Sore Remedies
  • Cough, Cold & Flu
  • Digestive Aids
  • Feminine Anti-Fungal/Anti-Itch
  • Hemorrhoidal Preps
  • Laxatives
  • Motion Sickness
  • Pain Relief
  • Respiratory Treatments
  • Sleep Aids & Sedatives
  • Stomach Remedies

Employer-Provided Health Coverage for Dependent Children
With the recent passage and enactment of Health Care Reform and the Affordable Care Act effective March 30, 2010, there are a series of changes related to the medical coverage of dependent children under the age of 27.  Per IRS Notice 2010-38, group health Plans and health insurance issuers are required to “provide dependent coverage of children to continue to make such coverage available for an adult child until age 26”. An additional amendment to this notice states that the IRS would “extend the general exclusion from gross income for reimbursements for medical care under an employer-provided accident or health plan to any employee’s child who has not attained age 27 as of the end of the taxable year”. Simply put, although the new law requires coverage for dependent children under 26 it allows for tax favored coverage for dependent children up to 27. Also, the IRS notice explains that flexible spending accounts can be modified to pay for uncovered expenses of employees' dependent children under age 27.   The tax free reimbursement of medical care for children under 27 takes effect March 30, 2010 while the Public Health Service Act which requires coverage of dependent children under the age of 26, will take effect on or after September 23, 2010 when the next plan year begins. For this particular change a child includes a son, daughter, stepchild, adopted child, or eligible foster child who is already covered or added to the employee's insurance plan before the end of the year.

FSA Annual Limits
Beginning January 1, 2013, FSA's will have an annual maximum election limit of $2,500 per year. This maximum limit will be increased annually based upon inflation to allow the FSA maximum election to be adjusted in accordance with the cost of living. FSA's will continue to be "use-it-or-lose-it" accounts. That is, any unused balance for one year can't be used to fund health care spending in the next year.
HRC will continue to update all enrollment and educational materials along with our web site to keep all of our brokers, partners, clients, and participants informed of any additional changes based upon the Health Care Reform legislation.


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