Bill would roll back restrictions on HSAs, FSAs

Washington -- Holders of certain tax-exempt health spending accounts again could use the funds to buy over-the-counter drugs without physician prescriptions under a provision in a Senate bill unveiled in late May.

Sen. Orrin Hatch (R, Utah)

The measure, introduced by Sen. Orrin Hatch (R, Utah), also would clarify that health savings accounts, flexible spending arrangements and medical savings accounts could be used to pay for retainer primary care services provided by concierge care practices, direct primary care practices and other similar practice setups.

"These health plans empower Americans to take control of their health and well-being," Hatch said in a statement. More than 11 million Americans have health plans that are eligible for HSAs, according to America's Health Insurance Plans. A House companion bill is sponsored by Rep. Erik Paulsen (R, Minn.).

A provision in the health system reform law that took effect on Jan. 1 prohibits holders of FSAs, HSAs and other similar accounts from using these tax-exempt funds to buy medications without a prescription. The provision exempts insulin and does not apply to medical devices and certain other nondrug items, including crutches, eyeglasses and blood glucose test kits, according to the Internal Revenue Service.

The American Medical Association supports the Hatch bill and its attempt to lessen physicians' prescription-writing burdens by repealing the health system reform law's over-the-counter restrictions for these accounts, according to a June 13 letter sent to Hatch by AMA Executive Vice President and CEO Michael D. Maves, MD, MBA.

"We believe this provision has resulted in unintended consequences to both physicians and patients and support its repeal," Dr. Maves said. The AMA did not have specific data about the impact of the prescription-writing requirement.

CVS Caremark spokeswoman Carolyn Castel said her company has advised its stores on how to comply with the new prescription requirements, but she did not elaborate on the requirement's impact on pharmacies.

Retainer care confusion

Confusion has been growing about whether HSAs, FSAs and other tax-exempted accounts can be used to pay for direct primary care, concierge care and other similar retainer care services, said Norm Wu, president and CEO of Qliance Medical Management Inc., a practice based in Seattle that offers medical homes with unlimited primary care for a monthly fee.

"The law is unclear as to whether our monthly fees are eligible medical expenses," Wu said. Physician fees are HSA-eligible medical expenses, but health plan premiums are not. Plan administrators have been making the final expense eligibility determination and have not reached a consensus. In addition, FSAs have difficulty processing Qliance's direct primary care fees because the accounts typically are used for fee-for-service reimbursement. "That's not the way we work," he said.

Steve Nardo, chief financial officer for PartnerMD, a concierge care practice based in Richmond, Va., has received increasingly more coverage denials from FSA plan administrators in the past few years. One patient whose FSA administrator denied coverage for PartnerMD pointed out to the practice that her plan nevertheless approves payment for such other types of items as health club membership dues, wart removal and sexual dysfunction medications.

Nardo wasn't sure how many PartnerMD patients have HSAs, FSAs or other tax-exempted accounts, but the number seems to be growing. PartnerMD advises its patients to check ahead of time if their health plans cover concierge care.

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