As some Republican lawmakers continue to press for a repeal of the recently enacted U.S. health care system reforms, one provision of the new law already will affect consumers’ ability to use prepaid debit cards linked to health care savings and flexible spending accounts.
Starting Jan. 1, consumers will need a doctor’s prescription to purchase drugs from a list of 16,000 over-the-counter medications to take advantage of the accounts’ pretax benefits.
However, at least two issuers, Wells Fargo & Co. and U.S. Bancorp, are not overly concerned about the provision’s impact, though one analyst believes consumers might reduce how much they deposit into their accounts.
“Once the government starts putting restrictions on things, the users are liable to worry that more are on the way,” says Ben Jackson, senior analyst at Mercator Advisory Group.
In any case, the issuers are notifying and are preparing cardholders for the changes through various means, such as e-mail notices and website updates.
Wells Fargo is anticipating a large increase in HSA enrollment for next year, despite the new provision. “You’re starting to see better adoption as the product matures and awareness increases about what the product can offer to the consumer,” says Liz Ryan, head of Wells Fargo health benefit services.
HSAs and FSAs hold pretax dollars consumers set aside, usually in conjunction with their employer health plans, to pay out-of-pocket health care costs. That includes insurance copays and deductibles, treatments an insurance plan may not cover, eyeglasses and contact lenses, and dental work. Nonprescription medications currently are eligible for such payments, but that changes Jan. 1.
FSA funds do not carry over from year to year, so participants must use the funds in their accounts or lose them. HSA users can build their accounts, and they either may carry over unused funds or apply them toward supplementary retirement investments.
Ryan believes the new law will cause confusion among consumers, so Wells Fargo essentially is working to reeducate its health-benefit cardholders on how to properly use the their accounts, Ryan says. “That’s where we wish the law [did not make a change] because account-based plans helped create some consumerism around health care,” she says.
U.S. Bancorp has not been as aggressive as Wells Fargo in reaching out to its cardholders because the incoming Republican-led House of Representatives still may attempt to repeal some, if not all, provisions in the health card-reform law, says Ralph Bernstein, the bank’s senior vice president of health care payment solutions. “The last thing we want to do is confuse [cardholders] even more by sending an authoritatively written” communication about the changes only to have parts of the law repealed two months later, he says.
Indeed, signs are emerging in Washington that Republicans have the over-the-counter medicine measure in their sights, Bernstein says.
Mercator’s Jackson believes if the Republicans attempt to deconstruct the bill piecemeal, “this might be a popular place to start.”
Democrats still control the Senate, however. And even if both houses were to vote to repeal all or part of the health care reforms, President Obama likely would veto any such legislation, observers say.
Meantime, a number of organizations have expressed concerns about Internal Revenue Service guidelines regarding clarifications on the new law. The IRS has not finalized its guidance on processing over-the-counter drugs as prescriptions; the guidelines are open for public comment until Dec. 27.
The Association of Chain Drug Stores also has expressed concerns with the law and how it affects what is called the Inventory Information Approval System, which is point-of-sale technology retailers and pharmacies use to determine which purchases are eligible for payment with an HSA or FSA debit card. The system needs to be reworked to account for the new provisions, and pharmacies and retailers will then need to update their systems.
The Special Interest Group for IIAS Standards has said the IRS will allow a transition period between Jan. 1 and Jan. 15 for merchants to update their systems. The group believes the deadline can be met, but the Association of Chain Drug Stores is not so sure. In October, the Alexandria, Va.-based association sent a letter to the IRS to consider extending the transition period.
U.S. Bancorp’s Bernstein believes consumers might encounter some inconveniences if the approval system is not updated in time. Situations may arise in which consumers present prescriptions for over-the-counter medications, but the system will not recognize the purchases when debit cards are used for the payment. Cardholders instead would have to file a claim for reimbursement.
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