Unraveling the Benefits and Nuances of Flexible Spending Arrangements, Health Savings Accounts

Through a new cost-saving provision made possible by the recent COVID-19 relief CARES Act, consumers can now utilize flexible spending arrangements and health savings accounts to purchase cost-effective over-the-counter medications, said Marsha Barnes, CEO and founder of The Finance Bar, and Taylor Holgate, director of government affairs at the Consumer Healthcare Products Association.

AJMC®: Hello, I'm Matthew Gavidia. Today on MJH Life Sciences’ Medical World News, The American Journal of Managed Care® is pleased to welcome Marsha Barnes, chief executive officer and founder of The Finance Bar, and Taylor Holgate, director of Government Affairs at the Consumer Healthcare Products Association. Can you both just introduce yourself and tell us a little bit about your work?

Barnes: Sure. As you mentioned, Matt, my name is Marsha Barnes. I am a financial social worker, and a financial educator. I'm also the founder of The Finance Bar. At The Finance Bar, we offer direct coaching to women and couples, both online and offline resources to help them move from financially existing to financially thriving. Thank you for having me!

Holgate: Matt, I'm Taylor Holgate. I'm director of Federal Government Affairs at the Consumer Healthcare Products Association representing the OTC [over-the-counter] medicine industry. We are so excited to be working with Marsha to be spreading the word about a new consumer benefit that can help consumers better plan for their health care expenses and save money in the long run.

AJMC®: To start us off, Taylor, amid the COVID-19 pandemic, the need to have a financial security blanket has never been greater as clinical and social issues continue to affect Americans. How has your organization worked to assist Americans in delineating between high-value and low-value products in the market today?

Holgate: The message to consumers about high-value and low-value products is the same, coronavirus or not, and that is to use your common sense. If something is telling you it's a miracle cure, or if it sounds too good to be true, it probably is too good to be true. The benefit that we're talking about today is specifically about OTC medicines and those are going to be medicines from brand names that you know and trust. You're going to find them on the shelves at major retailers, they're all going to have a drug facts label on the back that tells you what the active ingredient is and what you should use it for and how much of it you should take.

Those kinds of things are going to be the kinds of things that this benefit applies to and that we're hoping to spread the word to consumers that you can use your new benefit to access those products now.

AJMC®: Additionally, Taylor, how can over-the-counter products address some health care needs prevalent today, especially when it comes to cost effectiveness?

Holgate: Well, OTC medicines are one of the most affordable levels of health care—it's really the do-it-yourself level of health care. You have the sniffles, or you have minor digestive distress or a headache, you can head over to your drugstore and you can find a whole range of products to choose from that might work for you. The average price of an OTC product is between $7 and $8—it's really affordable. It's really accessible to a lot of people and they're available in a lot of locations.

AJMC®: Marsha, one of the main things we're going to be talking about today is flexible spending arrangements (FSAs) and health savings accounts (HSAs). Can you speak more on these and what these are?

Barnes: Absolutely! So, Matt, both FSAs and HSAs are tax-advantaged accounts that allow people to simply save money for qualified medical expenses. Now, FSAs are an arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars, such as insurance co-pays, deductibles, qualified prescription drugs, and even medical devices.

Now, contributions are deductible from each paycheck throughout the year. However, with FSAs the annual contribution amount is available for use immediately or after the first contribution is made. Typically with FSAs it's very important to know that if you don't use all your contributions by the end of the year then there is the possibility of losing it unless your employer offers a grace period, and in this case, you have until around March 15 of the upcoming year to use it.

It's also important to note that employers can allow you up to $500 to be rolled over. So, I would suggest for anyone to make sure that you check with your employer if you have an FSA. Then with HSAs, it's also a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. HSAs are offered to those enrolled in a high-deductible health insurance plan, and in many cases, employees receive a debit card linked to their HSA balance which makes it convenient to pay for medical expenses, again, such as deductibles, co-pays, and medical equipment—very similar to FSAs. These funds, however, Matt, are able to be rolled over year after year.

Holgate: If I can just jump in, FSAs and HSAs are a little bit different but they both include this new OTC menstrual care health care benefit. So, if you have questions about the individual mechanics of your plan or what benefits might be available to you either through your health plan or through the other benefits that your employer may offer like an FSA, the best place to go is to your HR person or to your employer or to your health care provider to better understand the nuances of your own plan, but this benefit is included in both HSAs and FSAs, and that's what we want to spread the word about today.

AJMC®: In your experience consulting Americans on how to optimally manage their finances, Marsha, are FSAs and HSAs typically included in these conversations? And can you discuss some factors that have become of growing concern amid COVID-19?

Barnes: Certainly, so FSAs and HSAs are included in those conversations, because both are easier and more streamlined ways to save for anticipated and unexpected medical expenses, which allows our clients to plan ahead more effectively. It also helps reduce some of the anxiety around having to pull from their emergency savings accounts specifically for those medical expenses.

Now, some of the growing concerns specifically during this time have been around how to cover recurring expenses on top of increased expenses, and then also lack of access to care during COVID-19. However, the increase in telemedicine is allowing the ability to communicate with their provider and be diagnosed and advised on course of treatment. So, specifically, the CARES Act enables those with high-deductible health plans to use telemedicine services without having to pay the upfront costs, such as deductibles and out-of-pocket expenses, while also retaining the tax benefit contributions from the HSA.

To learn more about this new cost-saving provision, visit TaxFreeOTC.org.