December 10, 2007
Flexible Spending Accounts: HBC Opportunity?
By GMDC
Are retailers of over-the-counter (OTC) health and beauty care (HBC) products taking full advantage of spending from Flexible Spending Accounts (FSAs)?
In late 2003, eligibility for flex spending reimbursement was expanded to include many of the OTC medicines consumers rely on for their healthcare needs.
Many other retailers, especially eyeglass retailers, actively promote the usage of FSAs. This is highlighted in the last quarter of the year because FSAs are a “use it or lose it” account. Money set aside in an FSA must be utilized in the calendar year.
As health care costs continue to rise, FSAs are becoming a more common work-related benefit offered to help employees finance more out-of-pocket expenditures. The Kaiser Family Foundation, Employee Health Benefit Annual Survey, showed that 83 percent of firms with over 5,000 employees now offer employees FSAs as a benefit.
Flexible Spending Accounts and Health Savings Accounts (HSAs) work by allowing consumers to put aside pre-tax dollars in order to pay for health-related items throughout the year that are not covered by health insurance. This includes deductibles, co-pays and out of pocket expenses.
Savings can depend on several factors, including a consumer’s income and tax bracket. For example, a consumer with an annual income of $40,000 in the 15 percent tax bracket with estimated health care expenses of $2,000 would save approximately $453 annually by paying for their healthcare costs with pre-tax FSA dollars rather than post-tax ones.
There are many OTC HBC categories that are now covered by FSAs. These include allergy medicines, analgesics, antacids, antibiotic creams, family planning and birth control, first aid, home diagnostic kits, incontinence products, joint-support bandages, smoking-cessation relief, vaporizers and humidifiers and more. Items not covered would be cosmetics and shampoo, but treatments related to psoriasis and lice are covered. Vitamins and homeopathic medicines are only covered if prescribed by a health care professional, especially an item like calcium. Sunscreen with 30 or higher SPF is also covered.
If you consider a consumer who is taking a regular allergy medicine, or trying to stop smoking by using smoking-cessation products, the savings to the patient are immense.
But are consumers aware of the tremendous savings FSAs can bring them? With more employers offering this valuable program, the number of consumers enrolling in FSAs is increasing. HBC retailers need to take advantage of this opportunity.
Discussion Questions: Are retailers doing enough to educate and promote to consumers the benefits of FSAs with their health and beauty care spending? Can retailers do more, especially at the end of the year, to capture unused FSA spending? Are suppliers of FSA covered health and beauty products doing enough to educate and promote to consumers the benefits of FSAs?
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This is a tremendous opportunity for retailers. Most individuals that participate in Flex Spending Accounts do not know OTC products are covered. With the introduction in many companies of the Flex Spending Debit Card, the program will be much easier to use, and give the retailers that communicate well an opportunity for additional HBC sales growth.
Yes, I have an HSA and I use it to purchase all our family medicines, whether prescription or over the counter.
I agree, this is a tremendous opportunity. Many people sign up for FSA and don’t understand that some OTC can be included. Unfortunately, many don’t realize that what they don’t use is a loss also. Education is important and repetition of the message by the chain drug stores or retailers is essential.
The first one that starts an aggressive plan will benefit. How about free advice, maintenance of program, a display showing all the products that could be covered? Lots of opportunity!
As a retailer, it’s only an opportunity if you can get through the red tape to qualify. It’s not a simple task. Look at the new IRS FSA/HRA standards that go into effect January 1, 2008.
Some stores already identify FSA-eligible items on receipts.
I’m no HR expert, but I believe the eligible expenses are determined by the IRS, not the individual FSA plans.
As for ease of reimbursement, that depends on who is administering your FSA. Mine makes it easy for small expenditures when I use the FSA debit card; no faxing is required at all for my prescription co-pays, OTC meds, etc. On larger charges, such as for eyeglasses, they require documentation.
As for why not promote all year? It should, but December is a ripe time because of the use-it-or-lose it phenomenon. If you suddenly realize you have $100 left in the account, you may want to load up on contact lens solution, Advil or other things you use all the time, especially if they aren’t particularly perishable.
Why not have drugstore receipts put a star next to the items that are covered under “many” plans, with a little note at the bottom urging shoppers to check their plan to see if it in fact qualifies? That sure would win my loyalty!
This is a tremendous opportunity for consumers to benefit from the safe and effective use of over-the-counter medications with pre-tax dollars…and it holds terrific potential for retail organizations to jump on the bandwagon and promote the savings. With the introduction and further promotion of debit cards and other easy-to-use methods of tracking and communicating FSA eligible items, retailers can provide very tangible support to consumers.
Organizations such as SIGIS (formed exclusively to manage an industry-standard list of FSA eligible items for retail merchants, third party administrators, card processors and human resource directors and for which one of the foremost experts in OTC medications and database management collaborated in the development of the list of eligible items) have emerged to help retailers prepare and administer FSA programs.
It has been said that opportunity knocks once in a while–well FSA for OTC medications has swung the doors wide open.
Most drug stores only mention Flexible Spending Accounts in December, if they mention them at all. And OTC drugs usually aren’t mentioned. FSAs should be promoted 12 months a year, every day. Why not? Don’t shoppers have a lot of other things to do in December?
It is a great, unused opportunity at this point. But FSAs vary. The best thing retailers can do is promote the use of FSAs in advertising and in-store signage.
Remind people to check with their employers on their specific benefits, then invite them back to the store to get the most for their money.
It’s an educational and promotional opportunity.
The 2 problems with buying OTC medicines that are covered by FLEX is 1) most people don’t know which ones are covered (a great opportunity for retailers) and 2) it’s a pain to get provider approval. You need to fax them the receipt, which doesn’t really fit very well into a fax machine, so you need to tape it to an 8 1/2 x 11″ piece of paper, copy it and then fax.
I believe this is a mini conspiracy on the part of the providers as they know how difficult this is and won’t give you credit until you go through that laborious process–and if you don’t they keep the money in the end.
A solution would be retailers promoting the products plus providing a user friendly receipt that can be easily faxed–and they will reap the rewards for their efforts.
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This is a tremendous opportunity for retailers. Most individuals that participate in Flex Spending Accounts do not know OTC products are covered. With the introduction in many companies of the Flex Spending Debit Card, the program will be much easier to use, and give the retailers that communicate well an opportunity for additional HBC sales growth.
Yes, I have an HSA and I use it to purchase all our family medicines, whether prescription or over the counter.
I agree, this is a tremendous opportunity. Many people sign up for FSA and don’t understand that some OTC can be included. Unfortunately, many don’t realize that what they don’t use is a loss also. Education is important and repetition of the message by the chain drug stores or retailers is essential.
The first one that starts an aggressive plan will benefit. How about free advice, maintenance of program, a display showing all the products that could be covered? Lots of opportunity!
As a retailer, it’s only an opportunity if you can get through the red tape to qualify. It’s not a simple task. Look at the new IRS FSA/HRA standards that go into effect January 1, 2008.
Some stores already identify FSA-eligible items on receipts.
I’m no HR expert, but I believe the eligible expenses are determined by the IRS, not the individual FSA plans.
As for ease of reimbursement, that depends on who is administering your FSA. Mine makes it easy for small expenditures when I use the FSA debit card; no faxing is required at all for my prescription co-pays, OTC meds, etc. On larger charges, such as for eyeglasses, they require documentation.
As for why not promote all year? It should, but December is a ripe time because of the use-it-or-lose it phenomenon. If you suddenly realize you have $100 left in the account, you may want to load up on contact lens solution, Advil or other things you use all the time, especially if they aren’t particularly perishable.
Why not have drugstore receipts put a star next to the items that are covered under “many” plans, with a little note at the bottom urging shoppers to check their plan to see if it in fact qualifies? That sure would win my loyalty!
This is a tremendous opportunity for consumers to benefit from the safe and effective use of over-the-counter medications with pre-tax dollars…and it holds terrific potential for retail organizations to jump on the bandwagon and promote the savings. With the introduction and further promotion of debit cards and other easy-to-use methods of tracking and communicating FSA eligible items, retailers can provide very tangible support to consumers.
Organizations such as SIGIS (formed exclusively to manage an industry-standard list of FSA eligible items for retail merchants, third party administrators, card processors and human resource directors and for which one of the foremost experts in OTC medications and database management collaborated in the development of the list of eligible items) have emerged to help retailers prepare and administer FSA programs.
It has been said that opportunity knocks once in a while–well FSA for OTC medications has swung the doors wide open.
Most drug stores only mention Flexible Spending Accounts in December, if they mention them at all. And OTC drugs usually aren’t mentioned. FSAs should be promoted 12 months a year, every day. Why not? Don’t shoppers have a lot of other things to do in December?
It is a great, unused opportunity at this point. But FSAs vary. The best thing retailers can do is promote the use of FSAs in advertising and in-store signage.
Remind people to check with their employers on their specific benefits, then invite them back to the store to get the most for their money.
It’s an educational and promotional opportunity.
The 2 problems with buying OTC medicines that are covered by FLEX is 1) most people don’t know which ones are covered (a great opportunity for retailers) and 2) it’s a pain to get provider approval. You need to fax them the receipt, which doesn’t really fit very well into a fax machine, so you need to tape it to an 8 1/2 x 11″ piece of paper, copy it and then fax.
I believe this is a mini conspiracy on the part of the providers as they know how difficult this is and won’t give you credit until you go through that laborious process–and if you don’t they keep the money in the end.
A solution would be retailers promoting the products plus providing a user friendly receipt that can be easily faxed–and they will reap the rewards for their efforts.