What Passage of the CARES Act Means for FSA and HSA Clients

The rapid spread of coronavirus (COVID-19) has everyone on high alert. However, as consumers and caregivers are taking steps to protect themselves by buying essentials like over-the-counter drugs to prevent and manage symptoms, many were limited from paying for those expenses with their flexible spending account (FSA) or health savings account (HSA) funds.

That changed recently with the passage of the CARES Act, which included a provision that expanded product eligibility for FSAs and HSAs to include over-the-counter (OTC) medications and menstrual care (more commonly known as feminine care) products.

(Related: After Open Enrollment: 5 Tips to Help Employees Wisely Use Their Benefits)

According to Aite Group, there are currently more than 60 million people in America who are enrolled in FSAs and HSAs — many of whom participate through their employers, along with many others who learned about the benefits of these accounts through independent financial advisors and insurance agents. These individuals and families rely on spending account dollars to manage the skyrocketing costs of care, including protecting themselves from the spread of viruses like COVID-19.

For financial advisors and independent insurance agents, this is one of the most significant changes to tax-advantaged accounts in years, and there’s a great opportunity to help showcase just how meaningful these accounts can be for the health and financial bottom line of current and prospective clients.

Here are some key points advisors can share to help clients better understand the value of their FSA or HSA and how they can use these accounts to save money on everyday health needs throughout the year.

Newly eligible products

OTC medications. Previously, the Patient Protection and Affordable Care Act (PPACA) required account holders to obtain a prescription (Rx) to purchase common OTC medicines like Tylenol, Advil, and Claritin with an FSA or HSA. Not only did this greatly hamper the ability of Americans to use their tax-advantaged funds to protect themselves during crises like COVID-19, but it generated additional healthcare costs due to increased doctor’s office visits.

Why does it matter? Many products that may be used to treat the symptoms of COVID-19, influenza, cold and flu season, and seasonal allergies are classified as OTC medicines. In fact, sales for OTC medications reached $35 billion in 2018, and recommendations that consumers keep at least a one-month supply of OTC pain medications on hand to treat flu symptoms is increasing demand for these products. When it comes to FSAs and HSAs, eligibility of OTC medications has consistently been one of the most-asked questions and an area of confusion for account holders of all ages.

At the company I work for, Health-E Commerce — the parent brand of FSAstore.com, HSAstore.com and WellDeservedHealth.com — we’ve seen firsthand the rapid spike in sales for products associated with coronavirus preparedness. On FSAstore.com, purchases of first-aid products, thermometers, nasal saline solution, vaporizers and other eligible cold and flu products more than quadrupled in the second half of February and have been on a steady increase since news of the COVID-19 broke in early January.

Feminine products for menstrual care

For years, organizations and individuals have been advocating to have feminine products like tampons and pads included as eligible FSA and HSA items. Finally, those efforts have paid off and these essential products can now be purchased with tax-advantaged dollars.

Why does it matter? In 2017, there were more than 165 million women in the United States, compared to just over 159 million men. By 2020, it’s projected there will be over 174 million women and 167 million men. This growing demographic will spend an estimated $4,752 over their lifetime on tampons and pads, which doesn’t account for related products women buy during the approximately 396 months of their life when they have their period. Because women continue to be a primary influencer in determining enrollment in and utilization of health benefits and supplemental benefits, like spending accounts, this change makes FSAs and HSAs much more valuable to your clients.

According to an online survey conducted by Health-E Commerce last year, eligibility of feminine products and OTC medications were concerns for consumers. In fact, 59% of respondents said they would like a larger pool of reimbursable expenses to choose from and, more specifically, they would like to see the Rx provision repealed and for menstrual care products to be eligible for reimbursement. Retailers like FSAstore.com and HSAstore.com are working diligently to add the most sought-after and trusted selection of OTC and feminine products to an already robust online shopping experience.

The passage of the CARES Act is essential to millions of consumers who rely on the money they’ve contributed to tax advantaged accounts to carry them through times of crisis, when normal income may be reduced or strained.

By educating clients about these newly eligible options, financial advisors and independent agents can increase their potential for growth, while further solidifying relationships and trust with existing clients.

— Connect with ThinkAdvisor Life/Health on Facebook, LinkedIn and Twitter.

Rachel Rouleau, CFCI, is compliance director for Health-E Commerce, the parent brand of FSAstore.com, HSAstore.com, WellDeservedHealth.com, and Caring Mill.