How health care reform is changing health care spending accounts

How health care reform is changing health care spending accounts

The health care reform law is affecting the following health care spending accounts:

• Health care flexible spending account (FSA)
• Health reimbursement arrangement (HRA)
• Health savings account (HSA)
• Archer medical savings account (MSA)

The changes can be seen in two major areas:

Tax penalty increase for nonmedical HSA and MSA distributions

Money removed from an HSA or MSA and not used on qualified medical expenses will be taxed 20%. That's an increase of 10%. This change begins for disbursements made during tax years starting on or after January 1, 2011.

Prescriptions required for reimbursement of over-the-counter (OTC) drugs

Members can use health care spending account funds for OTC medicine or drugs as long as they have a prescription written by a doctor in the state where the medicine or drugs are purchased. This rule does not apply to insulin. This change starts January 1, 2011, for all plans regardless of the plan year dates.