HSA, FSA, and HRA Relief Under the CARES Act

To help your small business employees pay for medical, dental, vision, and prescription expenses, you can offer a:

• Health Savings Account (HSA)
• Flexible Spending Account (FSA)
• Health Reimbursement Arrangement (HRA)

Each of these accounts enables employees to pay for qualified healthcare costs on a tax-free basis. Employees can pay for the expenses out of pocket and then apply for tax-free reimbursement through the HSA, FSA, or HRA.

However, these accounts come with stipulations, including limitations on what constitutes eligible expenses for reimbursement. Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, certain restrictions have been eased.

Specifically, the CARES Act provides permanent relief for over-the-counter (OTC) drugs/medicines and menstrual care products plus temporary relief for telehealth services.

Permanent reliefs

OTC drugs/ medicines

The Affordable Care Act (ACA) requires certain over-the-counter drugs/medicines to have a prescription in order to be reimbursable through an HSA, FSA, or HRA.

Under the CARES Act, users of HSAs, FSAs, and HRAs do not need to have a prescription to be reimbursed for OTC drug/medicine expenses. This includes expenses for:

• Cold medications
• Antihistamines
• Antacids
• Anti-inflammatories
• Aspirin and other pain medications

In effect, the CARES Act reverses the ACA rule that requires a prescription in order to receive reimbursement for OTC drugs/medicines. Employees can now buy OTC drugs/medicines without a prescription and still be reimbursed tax-free through their HSA, FSA, or HRA.

The CARES Act reverses the ACA rule that requires a prescription in order to receive reimbursement for OTC drugs/medicines. Employees can now buy OTC drugs/medicines without a prescription and still be reimbursed tax-free through their HSA, FSA, or HRA.

Notably, according to the United States Food and Drug Administration (FDA), OTC drugs have specific characteristics, including:

• “The product has an acceptable safety margin.”
• “The product has low misuse and abuse potential under conditions of widespread availability.”
• “A healthcare practitioner is not needed for the safe and effective use of the product.”
• “The product has adequate labeling.”

Menstrual care products

The CARES Act adds menstrual care products to the list of eligible expenses that can be reimbursed through an HSA, FSA, or HRA. The Act defines “menstrual care product” as:

• Tampon
• Pad
• Liner
• Cup
• Sponge
• Similar products used for the purpose of menstruation

The CARES Act’s changes to OTC drugs/medicines and menstrual care products are permanent and apply to items purchased after December 31, 2019. As long as users make the purchases after that date, they can receive reimbursements through an HSA, FSA, or HRA.

Temporary relief

Telehealth and other remote care services

Employers that offer a High Deductible Health Plan (HDHP) typically combine the HDHP with an HSA to help offset the (employee) cost of the HDHP.

Now, HSA, FSA, and HRA users can receive reimbursement for telehealth and “other remote care expenses” without having to first meet their minimum HDHP deductible.

Normally, expenses for telehealth services are reimbursable through an HSA. However, the HSA holder had to satisfy their minimum HDHP deductible before their telehealth expenses could be covered. The CARES Act temporarily removes this requirement. Now, HSA, FSA, and HRA users can receive reimbursement for telehealth and “other remote care expenses” without having to first meet their minimum HDHP deductible.

This change will expire on December 31, 2020.

Next steps for small employers

If you offer an HSA, FSA, or HRA, you will need to review the language in your plan documents and, if necessary, update them to reflect the CARES Act’s changes. Be sure to work with your legal team and benefits advisors to ensure the amended documents comply with the Act’s provisions.

Your legal team can help you answer complex questions not explained in the CARES Act. For instance, the Act does not say what’s included in “other remote care services.” So, you’ll need to defer to legal counsel, who can then decipher the term’s meaning and ensure your employees are appropriately reimbursed for those expenses.

Also, develop a plan for communicating the changes to your employees so they will be aware of the new HSA, FSA, and HRA reliefs available to them.