Tax-Free Over the Counter Medications with ICHRA: Exploring the CARES Act Impact on HRAs

Team Orca
Jan 30, 2024

Regulatory reform shapes the way we receive healthcare. The CARES Act, a legislation passed by Congress in , has had a profound impact on Health Reimbursement Arrangements (HRAs), especially when it comes to tax-free over-the-counter medications. In this article, we will dive deep into the effect of the CARES Act on HRAs and explore how it has expanded the flexibility of HRAs, FSAs, and HSAs.

Understanding the Impact of the CARES Act on Health Reimbursement Arrangements

The CARES Act has expanded the flexibility of HRAs, FSAs, and HSAs, making it easier for employees to access the healthcare they need.

What did the CARES Act change?

Before the CARES Act, over-the-counter medications were not considered eligible expenses under HRAs. However, with the new legislation, employees can now use their HRA funds to purchase over-the-counter drugs without a prescription. This means that those allergy medications, pain relief creams, and other over-the-counter remedies can now be covered by your HRA, saving you money in the process. It's a win-win situation!

The impact of the CARES Act on HRAs goes beyond just over-the-counter medications. The expanded flexibility of HRAs, FSAs, and HSAs has become even more beneficial with the changes brought about by the CARES Act. HRA funds can now be used to cover a broader range of medical expenses, giving employees more freedom and control when it comes to their healthcare. This expanded flexibility applies not only to over-the-counter medications but also to other qualified medical expenses such as menstrual care products and certain telehealth services.

For those who have Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs), there's good news for you too! The CARES Act now allows these accounts to reimburse the cost of over-the-counter drugs without a prescription. Previously, you needed a doctor's order to use your FSA or HSA funds for these types of medications. With the CARES Act, the process has been simplified, giving you easier access to the treatments and remedies you need.

What do the CARES Act reforms mean for consumers?

The benefits of the CARES Act changes regarding over-the-counter drugs are significant.

First, it eliminates the burden of having to get a prescription for medications that are readily available on store shelves. This means no more scheduling appointments just to get a prescription for allergy medication or other common remedies.

Secondly, the new rules allow employees to save money on these over-the-counter medications. By using their HRA, FSA, or HSA funds, they can purchase these drugs tax-free. This not only reduces out-of-pocket expenses for employees but also encourages them to proactively manage their health, knowing that these medications are covered.

For those enrolled in ICHRA (Individual Coverage Health Reimbursement Arrangements) or QSEHRA (Qualified Small Employer Health Reimbursement Arrangements), the CARES Act changes offer even more flexibility. With ICHRA or QSEHRA, employees can use their allowance to purchase individual health insurance coverage as well as eligible medical expenses.

When it comes to over-the-counter medications, the same rules apply to ICHRA and QSEHRA as they do for traditional HRAs. Employees can now use their ICHRA or QSEHRA funds to purchase over-the-counter drugs without a prescription, giving them even more options for managing their healthcare needs.

As with any new regulations or changes, you may have questions about how this all works. Luckily, we're here to help! If you're uncertain about how the CARES Act impacts HRAs and the use of over-the-counter medications, don't hesitate to reach out to the Venteur team! 

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