Posted on October 1, 2010

The Affordable Care Act of 2010 makes some changes to healthcare programs offered by employers.

Beginning January 1, 2011, over-the-counter (OTC) drugs, like a nonprescription pain reliever, will be reimbursable through healthcare programs only if the OTC drugs are prescribed. This means that a distribution from a Health Savings Account or Archer Medical Saving Account for an OTC drug will be tax-free only with a prescription. The change does not affect health- care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles.

The new changes apply to purchases made in 2011– even if the funds were set aside in 2010. This change does not affect eligible OTC drug purchases made on or before December 31, 2010.

Tax-Favored Healthcare programs which offset the cost of healthcare include:

  • Health Savings Accounts (HSAs)
  • Archer Medical Savings Accounts (Archer MSAs)
  • Health Flexible Spending Arrangements (FSAs)
  • Health Reimbursement Arrangements (HRAs)

For more information, go to and search IR-2010-95. The IRS also provides questions and answers to OTC medicines and drugs.