Medical Insurance Blog

Health Savings Accounts To Change Due to Healthcare Reform

The healthcare reform laws are changing the benefits numerous medical care spending accounts, such as Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), Archer Medical Savings Accounts (MSAs) and Health Reinbursement Accounts (HRAs).

Beginning on January 1, 2011, if you withdraw money out of your MSA or HSA account, and it's not spent on medical expenses that are considered qualified, then that money will be taxable and also subject to an extra 20% tax penalty, which is 10% higher than the current tax penalty rate.   The only exception to this is if distributions are made after a member's disability or death if the member is less than 65 years old.

Also, beginning on January 1, 2011, if you use your medical care spending account funds for over the counter medications (OTC) or drugs, then you must have a prescription for these medications or drugs from a doctor within the state in which you're making these purchases.  However, insulin is excluded from this new requirement.  Also, OTC items that aren't classified as drugs (such as supplies for testing blood sugar, bandages, etc.) can still be paid for with spending account funds.

These changes apply to all health care spending account plans, regardless of how long you've had your plan.