I have always utilized my Health Flexible Savings Account (HFSA) from work because it is very generous when it comes to getting tax breaks. I have saved tax dollars year after year for items such as over-the-counter medicines, insurance co-pay deductibles, eye care and other health expenses that are normally not covered by my insurance coverage. You see, taking advantage of the HSA expenses is just like getting huge discounts of up to 15-40% of the price of the item depending on your tax bracket. Since you are not getting taxed on this, the discount is equivalent to how much income tax you would have paid on it. In addition, these are considered as above-the-line deductions as well.
The key to the HFSA account is proper budgeting because if you overestimate and not use them during the year, you may end up forfeiting the remainder. In our case, we were already anticipating health expenses such as dental, otc drugs and medicines, otc supplies and equipment, and prescription contact. The amount that we have set-up last year was around $3,000. We have used up the whole thing and have some extra expenses still need to cover but these expenses will no longer be part of the claim. Anyways, because we are on a 28% bracket, we have pretty much save 28% on our purchase. You see, without the HFSA, I would have to earn $4,166 before tax in order to come up with the $3,000 expenses. In this scenario, I have saved $1,166 that I can use somewhere else.However, these things are changing starting on January 1, 2011. So now, I really have to re-adjust the amount to exclude any of the over-the-counter (OTC) drugs and medicines that are affected.
The new Health Care Reform Act has brought a lot of changes in the healthcare system. One of the changes is with regards to the Health Savings Account (HSA) both for personal and the one in the employer’s cafeteria plan (employee benefits section). In the past, individuals can claim over-the-counter (OTC) drugs and medicines without additional documentation. However, Â individuals need to provide physician statements when submitting a reimbursement claim for their Health Savings Account (HSA or HFSA or FSA) for any expenses incurred on or after January 1, 2011. Please keep in mind that this change only applies to OTC medicines and drugs and does not affect OTC supplies and equipment. The tables below are examples of OTC drugs and medicines to illustrate some of those expenses.
OTC Drugs and Medicines Taken Internally
|OTC Drugs Description||Examples|
|Allergy and sinus medicines||Actifed, Advil, Afrin, alavert, Benadryl, Chlor-Trimeton, Claritin, Tavist, Tylenol, Vicks, Diphedryl, Sudafed, Zicam, and store brands|
|Asthma medication||Bronkaid, inhaler, inhaler refills, Primatene mist, store brands|
|Cold Sore Relief||Novitra, Abreva, store brands|
|Cough and cold relief||cough syrups, tablets and capsules (Dayquil, Nyquil, Sudafed, store brands) – lozenges (Ricolah, Halls)|
|Digestive/stomach medications||includes anti-diarrhea, antacid, acid reducers, anti-diarrhea, laxatives, gas relief, lactose intolerant pills, motion sickness pills|
|Nicotine replacement||candy, gum, lozenges|
|Pain relievers||aspirin, ibuprofen, naproxen, acetaminophens (Advil, Bayer, Tylenol, Motrin, store brands)|
|Sleep aid||Alluna, natrol, nytol, unisom, store brands|
OTC Drugs and Medicines Applied Externally
|OTC Drugs Description||Examples|
|Acne medicine||Clean and Clear, Clearasil, Stridex and Store brands|
|Contraceptives||spermicidal products such as gels, advantage-S, encare, gyno II, ortho VCF|
|Ear Care||Seim-ear and ear wax removal such as Otix Drops|
|Eye Drops||Visine, Murine, store brands|
|Fluoride||pills, fluoride vitamins, fluoride supplements|
|Foot Treatment Medication||treatments of athletes foot, anti-fungal, bunios or spurs such as Micatine, fungi care, lotrimin, store brands|
|Hemorrhoid relief||hemorid, anusil, preparation H, Nupercainal, Tucks, Store brands|
|Jock itch treatment||tinactin, micatin, lotrimin, AF, lamisil AT, Cruez, store brands|
|Lice treatment||Licefree, Rid, Pronto, store brands|
|Sunblock or sunscreen||Coppertone, Hawaiian tropics, bull frog. Ineligible are toiletries and cosmetics including moisturized and makeup even with SPF|
|Topical products||ointments, creams, antiseptics, sprays. Bengay, ARth-RX, Dr. Holts|
|Wart Treatment||compund W, Dr. Schollâ€™s, Pedifix, Wart-off, Store brands|
|Yeast infection remedies||Monistat, Vagistate 3, Vaginex, Mycelex|
Photo Credit: PatriciaMarie
Everyday Tips says
I am the reason this change happened. We signed up for an HSA for the first time this year. Therefore, benefits had to be reduced…
This change does NOT affect HSAs (Health Savings Accounts). It only affects HRAs (Health Reimbursement Accounts) and FSAs (Flexible Spending Accounts). For a summarized overview of this law change, please read my comment below. Do NOT be misled into thinking you should go out and buy a whole bunch of your OTC drugs, medicines, medical supplies, etc, if you have an HSA. You will be wasting your money.
And to clarify, this law change does NOT affect your ability to purchase medical supplies such as band-aids, gauze, etc. with your HRA, FSA, or HSA. It only applies to drugs and medicines.
Yikes. So, it was you all along who made this happen!! LOL. 🙂
Starting in 2013, the Flexible Spending Account cap will be reduced to just $2,500 annually.
All your fault, EveryDay tips! lol
I didn’t know you could claim OTC without documentation down in the States.
Here, OTC medications aren’t covered at all, not even with private health insurance.
Jennifer Barry says
@young and thrifty – It’s not really that OTC drugs are covered, it’s that you can currently buy them with money taken from your income before taxes and placed in a special account. It’s still your money, you just save the income taxes.
Hi Ken, I never used the HFSA because I didn’t like the idea of forfeiting the money. My husband and I have a high deductible health plan so we have been maxing out the HSA. I was sorry to see the OTC provision was changing, but not surprised. It almost always happens that the rules for government programs get harder as time goes on. This effectively takes a lot of non-taxable money and makes it taxable again since I can’t get a doctor’s note for every sniffle and ache, and even if I could, it wouldn’t be cost effective to pay for the doctor visit.
The government needs to recoup funds to re-establish a receding economy. Thats why this is happened. Its not about overspending and buying otc medications that we may not use its about trying to repair the economy by sucking more money out of the consumer. They want us to pay more taxes. Plain and simple. I think this change really sucks. This year our fsa account helped us a great deal .. from bandages to bengay patches to wart medication to having to by fever medication at 2am and so on. If we didn’t have the cash in our pocket for these expenses we at least had the fsa mastercard to rely on. Now we are going to have to jump through hoops in order to be able to use these funds. What a crock!!!!! I thought the health reform bill was supposed to help us not hurt us.
I was looking up info on the part of the law that will be affecting the eligibility of OTC drugs and medicines being paid for through FSA and HRA accounts. Even though I’m a newbie in the world of health insurance information, I have an HSA, and that is not to be confused with an HRA or FSA account. This article is the first instance I have seen the term “HFSA”.
@ Jennifer Barry – What I would like to just inform everybody about (especially Jennifer Barry, since it sounds like she may think this law will affect her high deductible plan and thusly her HSA) is that this law is NOT restricting what you can buy with your HSA (Health Savings Account). It only applies to Flexible Spending Accounts (FSAs) and Health Reimbursement Accounts (HRAs). Also, this only applies to OTC drugs and medicines, and not OTC medical supplies such as band-aids, neosporin, etc. You will still be able to purchase band-aids, etc. through next year with your benefit cards.
@ LeiAngel – I realize that it will be frustrating that you’re going from unrestricted access to the medical supplies and drugs you’re used to, to having to get a prescription from a doctor and then submit a claim for reimbursement for your OTC drugs and medicines from “bengay patches to wart medication to… fever medication” (just to clarify, those bandages are still covered hassle-free by your FSA since they are not a “drug” or “medicine”), but at least you haven’t actually lost coverage of these items completely. With a prescription from your doctor, your claim for reimbursement for these medicines and treatments will hopefully be fully refunded to you, including the tax you may pay for them.
This comment is directed to “ItsDaPoleece”. Many physicians, including mine ,charge to get a script for the FSA OTC needed, now this law passed. So instead of being “affordable heathcare”, it is just the opposite for me. Last year when I purchased OTC meds, I submitted the receipts & UPCs to show the expenses for FSA reimbursement. I have never stockpiled & just cannot understand the government justification for this…excuse me, but this word fits, CRAP!