Health Reimbursement Arrangements, or HRAs, are becoming a smart strategy for small business owners and self-employed individuals, as a way to limit their health insurance costs and reduce taxes. Most of the time, when an employer sets up an HRA (Health Reimbursement Arrangement), the employer decides what type of health care, and often health insurance, to reimburse employees for, but medication falls under different rules. As of January 1, 2011, over-the-counter medications (with the exception of insulin) needed to be prescribed by a doctor in order for the cost to be reimbursed through an HRA.
The prescription could be written or electronically ordered by a licensed doctor in your state, and the drug must meet other legal requirements for prescriptions in your state. If all that’s in order, what documents are required to get reimbursement for medication? Of course, a doctor’s prescription is needed, and so is proof of purchase, such as:
- An official receipt from the pharmacy with your name, date of purchase, and amount of the purchase, or
- A receipt from the pharmacy with the name of the person for whom the prescription was written, the Rx number, and the date and amount of the purchase.
There are certain over-the-counter products that are not reimbursable through an HRA even if you have a prescription for them. That generally includes over-the-counter health-related products that are primarily used for general good health, such as hypo-allergenic products, toothpaste for sensitivity, hair loss treatment products, sun block lotions, etc.
On the other hand, several other health-related products that are available without a prescription may be reimbursed through an HRA. I’m referring to bandages, birth control products, blood pressure kits, braces, canes, contact lenses, crutches, denture products, diabetic testing supplies, durable medical equipment, hearing aid batteries, home diagnostic kits, hot/cold/steam packs, incontinence products, insulin, nebulizers, pregnancy and fertility kits, splints, thermometers, walkers, and wheelchairs and their accessories. Such items may qualify for reimbursement as long as they meet the definition of medical care in Code Section 213(d).
With the exception of over-the-counter medications, employers do have a lot of flexibility in choosing what to reimburse. And, since the health-care costs are to be reimbursed, employers don’t have to fund the employees’ account until the expenses have been incurred. Of course, health insurance premiums are predictable and can be prefunded, but just about everything else can be funded after the fact.
To take advantage of 2012 HRA benefits, these arrangements need to be established by December 31. That’s easier than you may think because our site manages all the details for you. You’ll be asked the specific questions required to get your documents correctly set up, and then one of our experts will contact you to complete the process with you. It may be one of the easiest and least expensive ways to drastically cut your health care costs that you can find.
I have been in the health insurance business for over 12 years. I’m passionate about Health Savings Accounts and enjoy blogging about them. I am also a husband and father of 2 beautiful children.