CARES Act Reverses ACA Restriction on OTC Drug Reimbursements
The ACA had amended several provisions of the Internal Revenue Code to prohibit tax-favored reimbursement for over the counter (OTC) drugs costs by health savings accounts (HSAs), Archer medical savings accounts (Archer MSAs), health flexible spending arrangements (Health FSAs), and health reimbursement arrangements (HRAs).
The ACA excepted insulin purchases and prescribed OTC drugs from this prohibition. This reimbursement restriction was controversial and has been in the current administration’s crosshairs from day one, since both legislative attempts in 2017 to repeal and replace the ACA would have permitted OTC drug reimbursements.
The CARES Act reverses the ACA’s reimbursement limitation and allows HSAs, Archer MSAs, Health FSAs, and HRAs to reimburse for OTC drugs and products after December 31, 2019.
The CARES Act also allows health accounts and plans to treat menstrual care products as medical expenses reimbursable on a pretax basis.