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Group seeks reprieve for using medical accounts to buy over-the-counter medicine

Susan Ladika

You’ll still be able to treat your holiday hangover without adding to your headaches, if a coalition of retailers, pharmacists and over-the-counter drug manufacturers has its way.

Come Jan. 1, a new provision in the federal government’s Patient Protection and Affordable Care Act will prohibit the purchase of over-the-counter (OTCs) medications from health savings accounts (HSAs), flexible spending accounts (FSAs) and similar accounts unless you have a doctor’s prescription. I wrote about the coming changes two weeks ago in a story the CreditCards.com editors quickly nicknamed the “HSA/FSA/OTC/WTF?” piece. My name for it, though, is the “cough and cold tax” story.

And it’s nothing to sneeze at: If this rule goes into effect, that means paying for remedies for tummy troubles and throbbing heads from your HSA or FSA will be off-limits. Your attempt to purchase the products with your HSA or FSA debit card might be blocked, or if the transaction does go through, you might need another stiff drink when you see the stiff penalty you might incur.

Because the money in your HSA or FSA comes from pre-tax dollars, buying an unauthorized OTC as of Jan. 1 would mean paying income tax on the money spent. While HSA holders can use the money in their account to buy non-health care related products, they face a 10 percent penalty if they do so. At the first of the year, that penalty will jump to 20 percent, even if you buy an OTC but don’t have a prescription.

The change applies to about 15 broad categories of OTCs. For those of us who have FSAs or HSAs, being able to buy allergy medications, aspirin or antacids is a great incentive to sock money away to buy the medications you regularly use.

It also might curb that impulse to throw a tube of lipstick or a copy of People magazine into your shopping cart, because you know you have to dig out cash, a credit card or another debit card to pay for those products.

Banks, retailers and other groups are squawking because they aren’t sure how they’re supposed to distinguish OTCs with a prescription and OTCs without one when someone goes to check out.

And a new rule proposed by the Treasury Department would prevent consumers from purchasing OTCs with their FSA debit cards as of Jan. 15.

In an effort to stop, or at least delay, the implementation of the new provisions, a coalition of the Consumer Healthcare Products Association, the National Association of Chain Drug Stores, the National Grocers Association, the Food Marketing Institute, the American Pharmacists Association and the National Community Pharmacists Association sent a letter to Congress on Thursday, opposing the change.

In their Nov. 18 letter to Congressional leaders, the group wrote, “OTC medicines provide Americans with effective, affordable, convenient and accessible means to address their health care needs. These medicines save consumers billions of dollars annually through fewer unnecessary doctors’ visits, less time lost from work, and the cost advantage OTC medicines generally carry in comparison to prescription drugs. Prohibiting the use of FSA funds to purchase these medicines, or requiring documentation from a doctor that OTCs are being used to treat a medical condition, would limit access and greatly reduce the cost-efficiencies associated with these medicines.”

If the group is successful in getting the new provisions repealed, consumers will have good reason to lift a glass at the New Year.

See related: Health care law brings expensive changes to HSA, FSA funds

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