FSA 101

FSA and HSA accounts are held by about one in 9 households. FSA (or health Flexible Spending Accounts) and HRA (or Health Reimbursement Arrangement) are employment benefit programs. HSA accounts (or Health Savings Accounts) are a health savings plan that is created by the consumer, and is commonly used as a long term investment account.

All FSA, HRA and HSA accounts offer account holders the benefit of paying for eligible health care expenditures with income that is not taxed by the IRS for income tax purposes. This feature makes these accounts very attractive to consumers wishing to reduce their income tax burden.

Often these health spending accounts have debit cards associated with them (FSA debit cards) that enable the account holder to withdraw their account funds to make eligible purchases. With one in nine households holding a health spending account, and about a third of those using FSA debit cards, we estimate that more than $5 billion is spent annually by FSA debit card holders for prescription purchases (including amounts paid by primary third party payors).

FSA, HRA and HSA accounts are increasingly impacting the pharmacy business. Today, we believe that the average independent pharmacy sells in excess of $70,000 of prescriptions to FSA debit card users generating more than $16,000 in gross profit. To protect these customer relationships, pharmacy must act because if they do not, they risk losing customer relationships to pharmacies that can serve the needs of these consumers.

This is a critically important market segment for pharmacies; and the impact on pharmacies is increasing. We anticipate the amount spent by FSA, HRA and HSA account holders to quadruple in the next four years.

With New IRS Guidelines, After January 1, 2009, a pharmacy has three ways to serve consumers with FSA debit:

1. IIAS-compliant POS system charges charges the FSA debit card for the amount of the eligible items within a shopping basket. The pharmacy should certify their merchant ID with SIGIS and must store the POS transaction data for audit purposes. This may require additional software or hardware purchase.

2. Using the “90% Rule”a pharmacy must certify that at least 90% sales are derived from FSA eligible items, and become SIGIS certified. NOTE: Under the “90% Rule” many FSA debit cards will likely not work and many customers who are able to use FSA debit will likely be burdened with having to file manual claims for some of their eligible purchases.

Or the low-cost, easy way…

1. With FSAok AutoCopay your existing pharmacy dispensing system submits a ‘coordination of benefits’ claim to Finpago for the amount of the eligible OTC and prescription copayments, payment authorizations are conducted and payments are made to the pharmacy.
   • No certifications necessary
   • No special hardware or software is required
   • You maintain your existing workflow
   • Purchase data is maintained by Finpago so any future audit request is easy to respond to

January 1, 2009 is approaching quickly – are you ready?