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Coronavirus “CARES Act” restores OTC coverage for FSAs, HRAs, HSAs

The COVID-19 response has people sheltering in place, bringing business traffic to a halt and causing financial hardship for many. To lessen the hardship, Congress has passed three rounds of legislation intended to bring economic relief to health care providers, businesses, and individuals dealing with coronavirus and its impact.

The CARES Act returns OTC coverage to pre-tax plans for at-home treatment during the coronavirus pandemic.


Coronavirus law (CARES Act) repeals Obamacare Tax

The third piece of COVID-19 aid, the Coronavirus Aid, Relief, and Economic Security (CARES) act, is intended to help individuals and families confronting the coronavirus. Part of the Act helps those impacted directly by permanently expanding coverage of eligible over-the-counter (OTC) medical products through a pre-tax health plan.

The Act does this by eliminating the Medicine Cabinet Tax, a provision in the Affordable Care Act (ACA) that says any OTC medical product paid for with pre-tax dollars from a Health Flexible Spending Arrangement (FSA), Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA) must have a doctor’s prescription.

That meant either skipping the tax-free benefit visit to the doctor’s office, usually at additional cost and as an unnecessary inconvenience for items like non-prescription cold or flu medication.

Now, families with an HSA, HRA, or FSA do not have to choose between giving up tax savings or visiting a doctor to treat mild symptoms with an OTC product.

Expands eligible items

The new law also expands the list of eligible medical items that can be purchased or reimbursed through a pre-tax plan to menstrual products.

Permits HDHP telehealth coverage (for HSAs)

The CARES act also provides safe harbor for high-deductible health plans associated with an HSA to provide pre-deductible coverage for remote health services (telehealth) for plans that begin no later than December 31, 2021.

HDHP coronavirus testing

The act does not include provisions to address IRS advice in Notice 2020-15, High Deductible Health Plans and expenses related to COVID-19 for COVID-19 testing. For more information on this, see our blog post, Coronavirus health emergency: HDHPs can cover testing with HSA.


Click image to download the Core COVID-19 brochure with forms.

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