IRS amends rules for using spending accounts for over-the-counter drugs

In October, we told you about a health care reform rule change for health care spending accounts. For purchases on or after January 1, 2011 (regardless of plan year dates), members can use health care spending account funds for an over-the-counter drug only if the drug is prescribed.

The rule change generally prohibited the use of health care flexible spending account and health reimbursement arrangement debit cards for over-the-counter drugs after January 15, 2011 - except at "90% pharmacies" (see the notice and guidance links in this article). However, on December 23, 2010, the IRS issued Notice 2011-5 , which amended the previous guidance on this provision.

The new notice generally permits the continued use of debit cards for over-the-counter drug expenses at pharmacies (including mail order and web-based vendors that sell prescription drugs), as well as at other vendors that have health care-related merchant codes, as long as all of the following requirements are met:

· The member obtains a prescription for the medicine or drug

· The prescription is presented to the pharmacist

· The medication is dispensed by the pharmacist in accordance with applicable law and assigned an Rx number

· Certain record-keeping requirements are satisfied

For more details about this provision and many others, check out the Library section of our health care reform website: anthem.com/healthcarereform

NEW Connecticut legislation regarding part-time workers allows employers to offer group health insurance as if they were full-time workers.

As of January 1st, CT employers can change group eligibility rules to allow workers averaging between 20 and 29 hours a week to participate in their group health plan, provided that they are offered the same plans and cost sharing arrangements as the full timers get.

To do this, the group administrator and the agent need to set up the group at the time of their open enrollment and follow a reasonable series of guidelines to assure there’s no adverse selection or discrimination. Don’t do this without thinking it through, however, if you’re the business owner.

Allowing part timers to qualify can cost you plenty of money in premium cost sharing, and once it’s in place, you’ll need to offer it to all of your part timers for the rest of the year, and if they decline coverage they will count against your participation requirements for the rest of the group, which might limit the carriers that will write your group.

If in doubt, call your broker for more information…