CARES Act Changes OTC Rules for FSA, HRA, and HSA as Well as Telemedicine

The Coronavirus Aid, Relief, and Economic Security Act (CARES) has now been signed into law on March 27, 2020. It is a mammoth bill of over 880 pages, and contains many employee benefit-related items. This post deals with two health and welfare items: over-the-counter drugs and telemedicine.

Included in the Act is a provision reauthorizing the ability of participants in health care FSAs, certain Health Reimbursement Arrangements (HRAs), and health savings accounts (HSAs) to have over-the-counter medications as items eligible for reimbursement without the necessity of a prescription–assuming their employer’s plan documents so allow. In addition, expenses for menstrual care products are added to the list of eligible items under an FSA, certain HRAs, and HSAs. In the case of HRAs, the plan document must allow for the reimbursement of all Internal Revenue Code Section 105(b) medical expenses in order to cover OTC and menstrual care products without a prescription (like there’s a prescription for menstrual care products). Many HRA plans only reimburse deductible or medical coinsurance and/or copay expenses not reimbursed under the integrated group health plan. In those cases, OTC and menstrual care products would not be an eligible reimbursable expense. These provisions are retroactive to January 1, 2020 (again, if the plan documents so allow) and do not expire until Congress changes its mind again.

While many employers have utilized telemedicine as a part of their group medical program, either integrated with the group health plan or as a separate benefit, the IRS has up until now not allowed those expenses to be reimbursed under a high-deductible health plan (HDHP) until the plan’s deductible was satisfied. If a plan did not follow that rule, neither the employer nor employees could make qualified HSA contributions. The CARES Act gives us a temporary fix to this problem by allowing payments for “telehealth or other remote care services” reimbursed before the HDHP deductible is met without jeopardizing the ability of employers and employees to contribute to their HSAs. This provision is effective immediately but does expire on December 31, 2021. Don’t be surprised if you see that deadline either extended or removed at a later time.

We’ll be providing many more benefit related updates out of the CARES Act over the next few days.