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over the counter medications and HRAs
Small Business

Over the counter meds now tax-free with ICHRA, QSEHRA

Tax-free tools like ICHRAs, QSEHRAs, FSAs and HSAs just got easier to use for over-the-counter (OTC) medication, thanks to The CARES ACT, the latest legislation to help combat the effects of Coronavirus (COVID-19). 

Over the counter drugs and HRAs

Over-the-counter medicine, also known as OTC or nonprescription medicine, is a convenient and accessible option for those seeking relief from minor ailments. These medications are safe and effective when used as directed on the label or as advised by a healthcare professional. With the recent changes in legislation, these items are now even more accessible for reimbursement through tax-free accounts like ICHRAs, QSEHRAs, FSAs, and HSAs.

The CARES Act brought a lot of ideas together on how to help small businesses and individuals alike (read our blog on how the CARES Act helps small businesses here). One of the things that might get overlooked is the expansion of eligible items available tax-free under these accounts. 

Now you can get reimbursed for women's hygiene products and over the counter drugs without a doctor's note.

Here are some of the most common items that removed the prescription requirement to be eligible for HRA reimbursement:

  • Cold, cough, and flu medicine
  • Tampons, pads, and liners
  • Pain relievers and anti-inflammatory medications
  • Allergy and sinus medicine
  • Digestive aids and laxatives
  • Baby rash ointments and creams
  • Baby electrolytes
  • Sleep aids
  • Skin treatments for conditions such as eczema and psoriasis
  • Acid controllers
  • Acne medications

The expanded eligible expenses list is a permanent change - one that we wholeheartedly welcome! 

How the CARES Act gives more flexibility to HRAs, FSAs, and HSAs

Two permanent changes arrived when the bipartisan CARES Act was passed and are effective immediately. 

  1. Previously, because of the Affordable Care Act, over-the-counter items like Tylenol and Robitussin required a prescription from a doctor in order to be eligible for reimbursement from an HSA, FSA or HRA. Under the CARES Act  over the counter medications are eligible without a letter from a doctor or prescription. That means your cold meds, cough syrup, allergy medicine and more can be reimbursed tax-free. This will make it much easier for individuals to utilize their accounts.

  2. Menstrual products like tampons, pads, liners, and cups are now classified as eligible expenses (as opposed to "hygiene") to use with a tax-advantaged account. High five to all the ladies who will be saving money in the future on this monthly expense!

Pro tip: Vitamins and supplements still require doctor's note since they're not classified as an eligible drug.

Ask us about tax-free health insurance reimbursement!

Why this change is so great

We were excited to see tax-advantaged accounts get some love from the recent CARES Act. It means that there are more opportunities to use pre-tax dollars for more medical expenses and it just got a lot easier.

Plus, this action helps reduce paperwork for doctors having to write prescription and doctors notes. They have enough on their plate already. 

Have questions about over the counter meds and ICHRA or QSEHRA?

We're here to help! Chat with us at the bottom of your screen, or peruse through some of these helpful resources:

Ask our experts how to get started today (it's easy!)

This post was originally published in 2020 and has been updated for 2023.

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