Rules for Debit Cards

As of Jan. 1, 2011, many over-the-counter (OTC) drugs and medicines (except insulin) are no longer qualified expenses, and account holders can't use HSA, FSA, or HRA funds to purchase OTC medications without a doctor’s prescription. This affects how you use your debit card when making purchases for OTC medications.
Changes don't affect HSA debit card functionality. HSA account holders need to keep all itemized receipts and prescriptions to prove they used the HSA only for qualified expenses.

How Does This Ruling Affect FSA and HRA Debit Cards?

The health care reform ruling changes how FSA and HRA debit cards work. As of Jan. 1, 2011, FSA and HRA debit card transactions no longer receive point-of-sale approval for OTC medications.However, if you have a doctor's prescription for OTC medications, you can still use your card.

FSA and HRA cards will continue to work at pharmacies that are IIAS-certified or those stores certified under the IRS 90% rule. (The 90% rule allows an exception to having IIAS certification if 90% of the store’s income consists of eligible health care expenses.) When an account holder swipes the HealthEquity FSA /HRA debit card at a merchant with an IIAS certification, the system identifies whether each product or service purchased is an eligible or ineligible health care expense. If there is enough money in the FSA or HRA, the eligible expense is automatically deducted from the HealthEquity account. If the account holder is purchasing ineligible items, the merchant will ask for another form of payment. A local drug store or pharmacy could deny the FSA/HRA debit card if the store hasn't implemented IIAS or doesn't meet the 90% rule.

What is a IIAS and how do I know if my drugstore is a certified merchant?

IIAS stands for inventory information approval system. It's a technology retailers use to ensure that over-the-counter health care account card transactions are eligible under IRS regulations. Items in the store's database are flagged "yes" or "no" for eligibility at the point of sale.

Most drug stores and pharmacies have already implemented IIAS. Costco, CVS, Kmart, Kroger, Safeway, Sam’s Club, Target, Wal-Mart, and Walgreens are just a few of the merchants continuing to accept health care debit cards, such as the HealthEquity debit card.

Find a full list of IIAS-certified merchants and a list of 90% Rule merchants on the Special Interest Group for IIAS Standard's (SIGIS's) web site.

What If an account holder’s doctor prescribes an OTC medication?

If a provider prescribes OTC medications to treat a specific medical condition, you'll need to give the pharmacist your prescription to purchase OTC medicines using your debit card. The pharmacist will dispense your medicine and give it an Rx number. This change doesn't apply to other health care expenses, such as medical devices, eye glasses, or contact lenses.

How will FSA/HRA expenses be verified?

At IIAS-certified pharmacies, qualified FSA/HRA purchases will automatically be verified at the point of sale. Manual verification will be required for OTC expense; you'll need to give the pharmacist your prescription to purchase OTC medicines using your debit card. The pharmacist will dispense your medicine and give it an Rx number. This change doesn't apply to other health care expenses, such as medical devices, eye glasses, or contact lenses