The Cares Act
The CARES ACT (Covid-3 Stimulus Bill) that was recently passed by Congress and signed into Law by the President Permanently reinstates coverage of OTC (Over the Counter) drugs and medicines as eligible for reimbursement from FSAs, HRAs, HSAs and Archer MSAs without need for a prescription. It further expands the definition of qualified OTC items to include menstrual care products. This change is effective for expenses incurred on or after January 1, 2020. Find a free download of the Bill.
The Special Interest Group for IIAS Standards
IIAS Certification – SIGIS has established the procedures which enable merchants to certify that they meet the requirements to operate an IIAS. There are two types of merchant IIAS certification:
- Merchants that operate their own inventory and cash register/point-of-sale software certify directly by completing the SIGIS IIAS Merchant Questionnaire and completing a technical certification with their acquirer. See IIAS Merchant Certification for more information.
- Merchants that have contracted with a POS vendor/third-party servicer (TPS) may use a simplified online registration if their POS vendor/TPS has completed SIGIS IIAS certification. See Third-Party Servicer (TPS) Certification for information and a list of SIGIS-certified TPS.
It is ready today, but full roll out requires SIGIS and merchants to take action. The key driver behind the change will be the availability of an updated list of eligible products from SIGIS and the implementation of that list by participating merchants. SIGIS is starting the process to create the list and is working closely with its members to complete this task.
From the HR Service/B3PA systems point of view, no new configuration will be required for this change to be effective. Any plans that currently cover OTC items such as saline solution and medical supplies will provide coverage for the expanded OTC items as soon as the merchants complete implementation, and OTCs are eligible in standard 213(d) plan templates for manual claims processing.
We anticipate that SIGIS and merchant implementation of the new eligible item list will occur gradually within 4-6 weeks of the President signing the bill into law. The first step is SIGIS updating its eligible products list and publishing it to merchants for download. Current SIGIS rules require merchants to update their point of sale systems on at least a monthly basis, and we anticipate many will likely do this as soon as the new list is available.
However, it is essential to emphasize that each merchant will adhere to their timeline for completion of this process based on their internal considerations, and card processors cannot influence this. Also, those merchants who have private label brands need to update their POS databases to mark these products as eligible.
All of this will undoubtedly result in inconsistencies in shopping experiences for the consumer (i.e., OTCs may be allowable at one merchant, but not another) as the industry. Makes this critical transition. We expect any issues like this to be temporary and resolved in a reasonably short time frame.
Is a merchant required to support an IIAS to accept FSA/HRA cards?
No. A merchant is not required to implement an IIAS; however, FSA/HRA card issuers will not be able to approve FSA/HRA card transactions when a merchant does not support an IIAS.
If you are a merchant and choose not to implement an IIAS, you do not need take additional steps. Merchants that are pharmacies/drug stores and primarily sell prescriptions and medical items may qualify under the IRS rules as a “90% Rule” merchant. See the 90% Rule Merchant Attestation for more information.
No. A merchant is not required to implement an IIAS; however, FSA/HRA card issuers will not be able to approve FSA/HRA card transactions when a merchant does not support an IIAS. If you are a merchant and choose not to implement an IIAS, you do not need take additional steps. Merchants that are pharmacies/drug stores and primarily sell prescriptions and medical items may qualify under the IRS rules as a “90% Rule” merchant. See the 90% Rule Merchant FAQs for more information.
For merchants that would like to accept the FSA/HRA cards from their customers, the IRS requires Merchants selling health care eligible products to support an Inventory Information Approval System (IIAS). The IIAS system is a combination of inventory management and point-of-sale systems that can verify the health care eligibility of items purchased with an FSA or HRA debit card, generate a payment transaction that contains the required IIAS information, and includes an information archive system that allows the merchant to respond to an IRS audit(s) as required. As noted above, for Drug Stores / Pharmacies where 90% of the sales on a store-by-store basis qualify as FSA-eligible, a 90% Rule registration program is an alternative option.
Merchants have the option to not become a Member of SIGIS by establishing their own IIAS standards or 90% Rule Exemption and working with third-party plan administrators individually.
With the IIAS Certification developed by SIGIS, a non-profit standards organization, a broad range of participating merchants have been able to implement a solution that is recognized industry-wide, which enables acceptance of most FSA/HRA payment cards. Likewise, third-party plan administrators have implemented a common set of procedures that are applied to IIAS transactions at participating merchants.