OKMGMA Medical Directions Winter 2011

By: Renee McKnightEach year, many new laws and regulations

bombard us. One that comes to mind with regard to identity theft is the Red Flags Rule. This new law applies to “financial institutions” and “creditors” with “covered accounts.” Did you know that identity theft is the No. 1 complaint with the Federal Trade Commission? These cases have risen 67% from 2009 to 2010, and that is even with the Health Insurance Portability and Accountability Act of 1996 in place. Additionally, there has been pressure for mandatory reporting. Let’s address the facts and each of these areas briefly.

Red Flags Rule Medical practices fall under the category

of “creditor.” The definition on the Federal Trade Commissions website is: “A creditor is any entity that regularly extends, renews, or continues credit; any entity that regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who is involved in the decision to extend, renew, or continue credit. Where non-profit and government entities defer payment for goods or services, they too, are to be considered creditors. Most creditors, except for those regulated by the Federal bank regulatory agencies and the NCUA, come under the jurisdiction of the FTC.”

As part of the Red Flag Rules, the Federal Trade Commission says a written program that identifies and detects the relevant “red flags” of identity theft. The program must also describe appropriate responses that would prevent and mitigate damages and a plan to update the program. The program must be managed by the Board of Directors, include staff training, and oversight of any service providers.

The program is designed based on the size, complexity, as well as the nature of their operations. According to the FTC website, “Guidelines issued by the FTC, the federal banking agencies, and the NCUA (ftc.ogv/opa/2007/10/redflag.shtm) should be helpful in assisting covered entities in designing their programs.” Twenty-six of the possible red flags

fall into five categories:• Alerts, notifications, or warnings from a

consumer reporting agency; • Suspicious documents; • Suspicious personally identifying

information, such as a suspicious address; • Unusual use of – or suspicious activity

relating to – a covered account; and• Notices from customers, victims of identity

theft, law enforcement authorities, or other businesses about possible identity theft in connection with covered accounts.”

For questions about compliance with the rules, you many contact [email protected].

What Happens If My Identity Is Stolen?Most identity theft is thought of as being a

financial or credit issue. In reality, it is only 26% of all types of identity theft. Let’s get into the five major areas of identity theft and also look at a new type that has also emerged. Much of our personal information is bought and sold in chat rooms, at flea markets, and even shared with friends and family. 1) Driver’s License:

a) Thieves can check into a hospital as someone else. They can have procedures done in the stolen person’s name, billing the person whose identity was used. And even worse – now the stolen person’s medical

Insight into Identity Theft & the Impact on Managed Care Practices

OKMGMA Medical Directions

O k l a h O m a m e d i c a l G r O u p m a n a G e m e n t a s s O c i a t i O n

Winter 2011

See Identity, Page 4

Inside This IssueLetter from the President: Diana Scherber

Page 2

Welcome New OKMGMA Officers

Page 3

Is It Time to Repot Yourself?

Page 6

The Threshold Thread

Page 8

Legislative Brief -- Health Care Reform: IRS Q&As on OTC Drugs and Debit Cards

Page 9

OKMGMA Medical DirectionsPage 2

OKMGMA 2011Board of Directors

OfficersPresidentDiana Scherber, CMPEMercy Health Network4345 W. Memorial Rd. Suite 200Oklahoma City, OK 73134Phone: (405) [email protected]

President-ElectAmanda Smith, MHA, CMPEOU College of Medicine - Tulsa4502 E. 41 St. Room 2A43Tulsa, OK 74135Phone: (918) [email protected]

Past PresidentRuby DustSurgery, Inc.1725 E. 19th Suite 800Tulsa, OK 74104Phone: (918) [email protected]

TreasurerMichelle Park, MBA, CMPECollege of Dentistry - OUHSC1201 N. Stonewall Ave.Oklahoma City, OK 73117Phone: (405) 271-8001 ext. [email protected]

SecretaryCindy WoodwardThe Women’s Health Group1919 S. Wheeling Ave. Suite 500Tulsa, OK 74104Phone: (918) [email protected]

Dear Fellow OKMGMA Members:

I expect great things for you in 2011! Do you? What is an expectation anyway? Various definitions of the word include “the act or state of looking forward or anticipating,” “an expectant mental attitude,” “a thing looked forward to” and “a prospect of future good or profit.”

If I could ask you to consider three things for 2011, they would be:

• Refocus your own goals.• Improve your team’s performance.• Give back.

We have all heard this advice: “You must have a map or you could end up anywhere.” “Begin with the end in mind.” “Written goals are more likely to be met.” But in today’s fast-paced, high-stress healthcare environment, we might not take the time to reevaluate our own professional and personal goals and make certain our efforts are consistent in that direction. I think the first part of the year is always a good time to do this. Schedule yourself for two hours to really think about what you want to accomplish in the next 12 to 36 months. Write the plan down and schedule times to check in with yourself about that plan.

My friend and colleague, Rhett Laubach, said it best in his book Leaders in Gear that “once you get the gap between average and amazing identified, work with your team on getting one percent closer to amazing.” Think about the last time you met with your team solely to discuss where you are and where you could be in terms of performance. Make written goals to share with your team and update them quarterly on the progress. Reward your members as they achieve their goals. It takes a good leader for many teams to take the next step to achieving better success. Be that leader!

Few of us really have effective succession plans. We all work toward short-term goals, sometimes in survival mode. We rarely think about what will happen to our business or practice when we retire or move. I think mentoring is a great way to start succession plans. Identify someone at your office and make time to help them reach their goals. Meet with them periodically to measure and celebrate their success. Your practice and OKMGMA would benefit from the deliberate growing of leaders, and it is a great thing to do!

Make it your goal to send someone who mentored you a thank you note for the month of February – tell them how much their leadership helped you in your career. As the late President Ronald Reagan once said, “We can’t help everyone, but everyone can help someone.”

As we move to an annual conference for the first time, we hope you will join us for “Great Expectations” April 20-21 at the Hard Rock Hotel & Casino in Tulsa. Registration is open now. We are planning a great meeting, so bring a friend! More info as well as other OKMGMA information is online at www.okmgma.com.

I have much to be thankful for in my personal and professional life. One of those blessings is to serve with a selfless, tireless group of colleagues on the OKMGMA Board of Directors. Thank you to all of the membership for this opportunity to serve the organization again.

I leave you with a favorite quote by Abraham Lincoln: “I do the very best I know how – the very best I can; and mean to do so until the end.”

With great expectations,

Diana Scherber, CMPEOKMGMA President

Letter from the President:Diana Scherber

Diana Scherber, CMPEOKMGMA President

Page 3

We’d like to extend a warm welcome to our new OKMGMA Officers for the 2011 year! These individuals will be leading our organization and working diligently to bring you great programming and healthcare management information throughout the year.

PresidentDiana Scherber, CMPEMercy Physicians | Oklahoma [email protected]

President-ElectAmanda Smith, MHA, CMPEOU College of Medicine – Tulsa | [email protected]

Past PresidentRuby DustSurgery, Inc. | [email protected]

TreasurerMichelle Park, MBA, CMPECollege of Dentistry – OUHSC | Oklahoma [email protected]

SecretaryCindy WoodwardThe Women’s Health Group | [email protected]

Chapter Presidents/Representatives EasternSandy GeorgeUrologic Specialties | [email protected]

Oklahoma CityChristy Vanderbilt, CPCMedical Business Office | Oklahoma [email protected]

Officers

Legislative Liaison/ParliamentarianRegina JohnstonLynn E. Frame MD Inc. | [email protected]

Membership ChairDerek MountfordMercy Physicians | Oklahoma [email protected]

Vendor Committee ChairTracy SpearsTransworld Systems | [email protected]

Dean Carr, MBA, CMPEAssociated Anesthesiologists, Inc. | [email protected]

Brandon DavidsonHenry Schein Medical | [email protected]

Cheryl Deacon, CPC, CCS-POUHSC Dept. Radiological Sciences | Oklahoma [email protected]

Vicki TrussellOKC Clinic Medical Center ASC | Oklahoma [email protected]

Directors at Large

Welcome New OKMGMA Officers

Welcome to everyone, and here’s to a great 2011 with OKMGMA!

Illustration: Idea G

o, | FreeDig

italPhotos.net

OKMGMA Medical DirectionsPage 4

records have been altered. That can be life-threatening to the person and can affect insurance coverages for that person and his or her family.b) Stolen information can be provided to an officer when the thief is pulled over for speeding or drinking and driving.c) Checks can be written, and the victim will have issues writing them due to his or her information being in the National Check Registry.

2) Social Security Number:a) There are millions of illegal immigrants working here in the United States. A few years back, there was no mandatory requirement there is today of verifying social security numbers. How are they working and under whose social security number? Are they paying your taxes for you? b) Convicted felons stealing our identities while in prison. You may remember a news article in the July 4, 2010, Parade newspaper titled “Prison Work Programs Pose ID-Theft Risk.” According to the article, convicted criminals in eight states – Oklahoma being one of them -- have access to citizens’ social security numbers as part of their work-release program. These programs help states save money by using the inmates for jobs such as data processing. With today’s unemployment rate, how long would it take before a former felon would use someone else’s social security number just to get a job? How long before they would commit a crime again? There are also inmates who run identity theft rings right from prison, selling social security numbers. c) False tax returns being filed to receive refunds that may or may not be due to victim.

3) Use of your character or crimes being committed in your name:

a) Many employers perform background checks. What happens when false information is on there and you cannot get a job, or lose your current job?b) Those who are dependent on

social security and disability benefits could lose those benefits due to felonies committed in their name.c) Worse yet, those whose names are used in a crime could be taken to jail for a crime they did not commit.

4) Financial:a) New contracts with creditors could make you liable for your debt if you do not dispute in a timely manner. (Many of these are 60 days, but you need to read the fine print.)b) Although still detrimental to people’s being, financial compromising is the easiest to track and catch: Thieves frequently can be caught with cameras that may be used in stores, by tracking transactions and limiting with credit limitations placed on cards.

5) Medical (We will expand on this area)

Medical theft is the most problematic and complicated type that could be life-threatening when being treated based on inaccurate records.

a) Health insurance can be used to obtain goods or services, such as medical equipment fraud, “rolling lab” schemes, Medicare fraud, or even thieves paying cash so they can get prescription medications to sell on the street.What can be done to help detect

medical identity theft?1. Review your health insurance provider’s explanation of benefits.2. Obtain your “benefits request” each year from your insurance provider.3. Request your medical records if you have any suspicion of fraud.4. Request an “accounting of disclosure.”5. Order your annual Medical Information Bureau report.

6) Synthetic Identity Thefta) A compromiser can use YOUR driver’s license, SOMEONE ELSE’s social security, ANOTHER’s medical insurance card, and yet ANOTHER’s character. Can you imagine unraveling and trying to fix that web?

Data Breach Facts for 2010 Source: “Data Breaches in 2010: Indicates Mandatory Reporting Needed”

The Identity Theft Resource Center recorded 662 breaches on its 2010 ITRC Breach List.

Paper breaches account for nearly 20% (one-fifth) of known breaches and typically go unnoticed until a consumer reports the problem to local media. There is generally no mandatory reporting requirement for paper breaches.• Malicious attacks still account for

more breaches than human error, with hacking at 17.1% and insider theft at 15.4%.

• 38.5% (255) of listed breaches did not identify the manner in which the information was exposed. This indicates a clear lack of transparency and full reporting to the public.

• 51% of publicly reported breaches indicated the number of records exposed, totaling 16.1 million records. Note: Records can mean credit cards, bank accounts or other information. It is not representative of the number of people involved.

• However, nearly half of all breaches (49%) did not list the number of potentially exposed records. This ingrained inaccuracy in reporting is another argument for mandatory reporting.

• 412 breaches (62%) reported exposure of Social Security Numbers, representing 76% of known records.

• 170 breaches (26%) involved credit or debit cards, representing about 29% of known records.

It is apparent, with few exceptions, that there is no transparency when it comes to reporting breaches. Other than breaches reported by the media and a few progressive state websites, there is little or no information available on many data breach events. It is clear that without a mandatory national reporting requirement, that many data breaches will continue to be unreported, or under-reported. Mandatory reporting has had a positive impact on the reported number of medical data breaches.

Identity, From Page 1

See Identity, Page 5

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It would be helpful if the nation had a centralized, publicly available, data breach reporting site. It should be comprehensive enough to allow readers to find out what happened, what information was compromised, and why the breach happened. This would allow law enforcement to address this type of crime better.

What Can I Do to Protect My Identity and the Identity of My Clients?

Breaches happen. Breached information has been used months after the original exposure. Make sure you, your family, and your patients are protected. There are identity theft restoration services out there that will do more than just monitoring – they will do the work to restore your identity in all areas.

Seek out companies that can help limit your losses and exposures right now through proper education, providing documentation and protection for your staff. Kroll Fraud Solutions

is the No. 1 Risk Security Company assisting with data breaches & recovery, and Harvard Risk Management offers training, workshops, and voluntary benefits to help increase awareness and protection as a voluntary benefit.

Be aware of what is happening so you can make sure you are who your records and background say you are. If you have or are looking at getting protection for yourself, you want to purchase that protection BEFORE you find out that your information was compromised so you can receive the restoration benefits without it being a pre-existing condition.

Keep in mind that even with the best security and procedures, data breaches occur daily. It is not “if” it will happen, but merely “when” it will happen. What do I have in place? Our information is everywhere: storage buildings, online, public records, schools attended, department of motor vehicles, places applied for employment, and yes, our doctor’s offices. You can do everything right, but what about the people we do business with everyday, we hire,

our vendors, etc.? There is reason and cause to have a plan of action and/or protection for when it does.

Resources for this article come from conferences attended with Kroll Fraud Solutions; Michael McCoy, author of “The Silent Crime: What You Need to Know About Identity Theft”; Federal Trade Commission; market research; and the Identity Theft Resource Center.

Renee McKnight is a certified risk management consultant and regional trainer for Harvard Risk Management Corporation (www.harvardbenefits.com). Harvard Risk Management offers training, workshops, and voluntary benefits for all businesses and individuals. She specializes in healthcare having worked in the industry for over 5 years and in the insurance industry for over 8 years. Any questions or comments you may have you can email: [email protected] or call (918) 639-1091.

Identity, From Page 4

Experience the Difference.

405.292.2951 | www.eidebai l ly.com

Our experienced practice managers, CPAs, tax and accounting specialists, reimbursement specialists and marketing consultants are proficient in handling the needs of physician practices large and small. We understand the complexities of your business and work as a team to facilitate sound decision making, reduce practice costs and maximize profits.

You take care of your patients, we’ll take care of the rest.

OKMGMA Medical DirectionsPage 6

By: Jim Mathis“There is no better time to seize the moment than when the world is in a fetal position.”

What I Learned From a HobbyI like to do landscaping in my spare time. My step-

daughter thought I was a professional florist when we first met. Presently, I am working on a great-looking yard and even have a variety of tropical plants in my office. They are high maintenance and constantly need attention. But it keeps me occupied and distracted from work when I most need to be.

Recently I had to repot two palm trees that were beginning to stagnate and die. They were turning brown and quit producing new growth. It was messy but needed to be done to guarantee their growth.

This came up in a casual conversation recently. I was having lunch with a business associate. He mentioned that he was taking a sabbatical from some of his social activities.

“I am repotting myself,” he said, with a grin.“Huh? What do you mean?” I asked.He explained, “I need to let my roots grow, get rid of the

stale soil around me, and put myself in a larger place.”Wow! What a novel approach to reinvention.The recent recession has forced many who were “pot-

bound” to become stagnant and quit producing new growth. But others have found new ways to repot themselves. Financial institutions once thought to be the bedrock of stability are receiving bailouts from the United States government at taxpayer expense. Many banks once thought to be successful because of their enormous size now have been bought out in the diminishing hope they can stay in business.

In a recent article covered by MSNBC.com, many large banks are going back to basic customer service and greeting people as they come in. It’s their attempt to recapture an audience that feels overlooked.

Companies that were once strong or powerful became stagnant in the changing world climate. Their competition though “repotted” themselves and carved out new and more successful niches in the market. They have seen shifting ground and have taken a new position in business and service to their customers.

Are You on Safe Ground?The playing field has changed. What was once thought

of as safe ground is now unstable and shifting. Remember the great tsunami of December 2004? An earthquake event off the coast of Indonesia triggered a giant wave that swept across the Indian Ocean, finally washing ashore thousands of miles away. The surge took homes, property, lives and everything in its path, leaving destruction in its wake. Recently, it’s as if a giant tsunami swept across the global market and nothing will ever be the same again.

Some already knew how to take advantage of the

opportunities that abounded in the crisis. In a letter to his shareholders in February 2010, iconic American investor Warren Buffett wrote, “We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors. The climate of fear is our best friend.” Warren knows the investors’ secret: a shrewd investor can take the worst of an economic crisis and turn it into a huge advantage.

Said another way, “There is no better time to seize the moment than when the world is in a fetal position.”

You Need to Repot YourselfHow have you let yourself stagnate in the market? Are

your roots “pot-bound” by old ideas or practices? Have you outgrown your environment? When was the last time you bloomed (read that: stood out from the crowd) or produced fruit (read that: produced results) in your career?

Repotting yourself requires that you take a long look at how others perceive you. What do they say about you? Why do people buy from you? I ask this of meeting planners and executives everywhere I go. Why did you choose me over others who do the same thing? The answers surprise me

Is It Time to Repot Yourself?

See Repot, Page 7

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often. Sometimes I am very flattered by their image of me. Sometimes they hired me because of my assistant’s attitude, or my website or something I had no control over.

Akemi Gaines writes, “Before creating your NEW you, you need to let go of your OLD you. Physically taking care of your environment by cleaning and de-cluttering can stimulate letting go of your mental clutter that has been holding you in the old pattern. Now throwing away your old clothes… is easy. It takes physical work, but really, it’s no-brainer work. The challenge is letting go of something that you once cherished.”

Repotting can be very messy. It means releasing yourself from the environment that you have become accustomed to. Your “pot” may have been your comfortable home, but now that comfortable home is holding you back. As you are assessing yourself, you realized that your growth is stagnating. You are wilting in the face of a changing environment. You are producing no measurable fruit and results.

Repotting causes you to take a long hard look at yourself. It causes you to go into temporary shock. You feel out of place for a while. That isn’t easy. Letting go of things that you cherish is difficult, but it has to be done very often to reinvent yourself. Sometimes it can be difficult and fulfilling at the same time. There comes a time when you may need to let go of your friends, teachers, mentors or even some of your family members who don’t resonate with you any longer.

What do you need to let go of?Not only does the old dirt get everywhere, but also the

new, fertile soil gets in places you didn’t expect. But the new soil is richer in nutrients. As your repotting takes shape, you become accustomed to the new surroundings. You acclimate. The new pot is bigger and allows you to expand. You spread your roots and start to grow again. You will begin to see the fruition – the results of your changes and adjust to the “new you.” So will those around you.

I constantly want to be in growth mode. I want to bloom and prosper. I want results that can’t be produced unless I change my location.

So do you.

Jim Mathis, CSP is The Reinvention Strategist™, an international Certified Speaking Professional and author. To subscribe to his free personal and professional development newsletter, please send an email to: [email protected] with the word SUBSCRIBE in the subject. An electronic copy will be sent out to you every month. For more information on how Jim and his programs can benefit your organization or group, please call 1-888-688- 0220, or visit his web site: www.jimmathis.com.

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Repot, From Page 6

By: Rhett LaubachThe Threshold Thread is a concept I developed to frame

the quintessential success trait of high-achievers. They all have developed the ability to push their capacities further than the average person. Another way to view the key difference of individuals who employ the Threshold Thread is they go above and beyond expectations.

So, what are the most common skill areas high-achievers have pushed the threshold in? The following list is built upon my leadership curriculum (www.PersonalLeadershipInsight.com). As you read through the list, think about how you are doing with each skill area in your life. When was the last time you worked to push yourself in each of the ten areas?Vision - Visualize the future you want for yourself, your organization, your company, your family, etc. just a little clearer, believe in that future just a little stronger and work just a little harder to create it. If you do, you are living the Threshold Thread. Integrity - Be just a little more convicted in your beliefs and values than you were yesterday. Make them stronger as you go. Your average person’s conviction in their values gets weaker from the time they set them. You will be a living example of the Threshold Thread if your values and beliefs get stronger.Innovativeness - When faced with a challenge, move quicker into solution mode than you did yesterday.

Wise Judgment - The Threshold Thread is a powerful concept when applied to your decision making. Are you making better decisions today than you did yesterday? One way to do this is to gather clearer and more exact information than you did before. You can’t create specific solutions with vague information.Service-Mindedness - It is natural to be self-serving. It is a basic human defense mechanism that dates back to the start of the human race. However, the Threshold Thread is about crossing over certain lines so you can have a higher quality of life today than you did yesterday. One of those lines is the line between MySpace and YourSpace. It is the line between thinking about yourself or others first.Goal Processing - What have you done today to move you closer to a big and/or small goal you have? Most high-achievers don’t make few huge leaps forward, but many small steps forward. Remember, the Threshold Thread is about pushing your capacity for action just a little further than you did before. Most of this “pushing” will be done in small spurts. Skill Assessment - This element is about knowing who you are and how to leverage your uniqueness for success. Get to know yourself a little more today by thinking about why you do what you do and how you can make adjustments to achieve a higher quality of life. Emotional Maturity - This is the Threshold Thread’s most fertile ground in terms of helping you achieve a higher quality of life. How do you respond to stress in your life? How do you respond when something goes wrong, someone aggravates you, etc.? Really think about if your responses to these situations are adding or detracting from your quality of life, learn how to make them better and then act. Fostering Relationships - Relationships are just like plants: they come in all different shapes and sizes, some can survive with minimal attention, but most require daily care and we aren’t born with the ability to keep them in great shape - we have to learn what it takes to do so. Push your relationship fostering abilities just a little bit forward. A few small changes can make huge differences. Masterful Communication - Your quality of life is directly impacted by your ability to effectively communicate with those around you. Next time you find yourself struggling in a writing, listening, or speaking situation, afterwards make a note to find out how people who succeed in those situations do it and model their success.

Rhett Laubach works with organizations that want to develop their people’s Personal Leadership Intelligence. He is a professional speaker, author, leadership expert, presentations coach and owner/operator of YourNextSpeaker, LLC - a leadership resource for organizations. Learn more at www.YourNextSpeaker.com.

OKMGMA Medical DirectionsPage 8

The Threshold Thread

Page 9

Distributed by: Jack NicarThe Patient Protection and Affordable Care Act (PPACA)

changed the rules for reimbursement of over-the-counter (OTC) medicines and drugs through plans such as health flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs). After December 31, 2010, OTC medicines and drugs (except insulin) may only be reimbursed with a prescription.

Subsequent guidance from the Internal Revenue Service (IRS) limited the use of FSA and HRA debit cards for OTC drug purchases after January 15, 2011. The IRS has now issued IRS Notice 2011-5, which contains new guidance allowing the continued use of FSA and HRA debit cards for the purchase of prescribed OTC medicines and drugs.

The IRS has also issued guidance in the form of Questions and Answers (Q&As) to help individuals understand the new rules for reimbursement of OTC medicines and drugs.

This CFR Legislative Brief describes IRS Notice 2011-5 and sets forth the Q&As provided by the IRS. Please read below for more information.

IRS Notice 2011-5IRS Notice 2011-5 modifies previous guidance found in

IRS Notice 2010-59, which stated that FSA and HRA debit cards may not be used after January 15, 2011, except at certain pharmacies. Under the new guidance, individuals can continue using FSA and HRA debit cards to purchase OTC medicines for drugs for which they have a prescription.

Effective after January 15, 2011, health FSA and HRA

debit cards may continue to be used at drug stores and pharmacies, at non-health care merchants that have pharmacies and at mail order and web-based vendors that sell prescription drugs, if:

• Prior to purchase, the prescription for the OTC medicine or drug is presented to the pharmacist, the OTC medicine or drug is properly dispensed by the pharmacist and a prescription number is assigned;

• The pharmacy or other vendor retains a record of the prescription number, the name of the purchaser and the date and amount of the purchase in a manner that meets IRS recordkeeping requirements;

• All of these records are available to the employer or its agent upon request;

• The debit card system will not accept a charge for an OTC medicine or drug unless a prescription number has been assigned; and

• All other rules related to the use of health FSA and HRA debit cards are satisfied.

Health FSA and HRA debit cards may also continue to be used for OTC medicine or drug purchases from health care providers other than pharmacies and mail order and web-based vendors, if:

• The vendor has a health-care related Merchant Code;• The vendor retains the name of the purchaser and

the date and amount of the purchase in a manner that meets IRS recordkeeping requirements;

• All of these records are available to the employer or its agent upon request;

• All other rules related to the use of health FSA and HRA debit cards are satisfied.

IRS Questions and AnswersHow are the rules changing for reimbursing the cost of over-the-counter medicines and drugs from health flexible spending arrangements (health FSAs) and health reimbursement arrangements (HRAs)?

Section 9003 of the Affordable Care Act established a new uniform standard for medical expenses. Effective Jan. 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription. This new rule does not apply to reimbursements for the cost of insulin, which will continue to be permitted, even if purchased without a prescription.

How are the rules changing for distributions from health savings accounts (HSAs) and Archer medical savings accounts (Archer MSAs) that are used to reimburse the cost

Health Care Reform: IRS Q&As on OTC Drugs and Debit Cards

Legislative Brief

See Health Care, Page 10

OKMGMA Medical DirectionsPage 10

of over-the-counter medicines and drugs?In accordance with Section 9003 of the Affordable Care

Act, only prescribed medicines or drugs (including over-the-counter medicines and drugs that are prescribed) and insulin (even if purchased without a prescription) will be considered qualifying medical expenses and subject to preferred tax treatment.

When will the changes become effective?The changes are effective for purchases of over-the-

counter medicines and drugs without a prescription after Dec. 31, 2010. The changes do not affect purchases of over-the-counter medicines and drugs in 2010, even if they are reimbursed after Dec. 31, 2010.

How do I prove that I have purchased an over-the-counter medicine or drug with a prescription so that I can get reimbursed from my employer’s health FSA or an HRA?

If your employer’s health FSA or HRA reimburses these expenses, you would provide the prescription (or a copy of the prescription, or another item showing that a prescription for the item has been issued) and the customer receipt (or similar third-party documentation showing the date of the sale and the amount of the charge). For example, documentation could consist of a customer receipt issued by a pharmacy that reflects the date of sale and the amount of the charge, along with a copy of the prescription; or it could consist of a customer receipt that identifies the name of the purchaser (or the name of the person for whom the prescription applies), the date and amount of the purchase and an Rx number.

How does this change affect over-the-counter medical devices and supplies?

The new rule does not apply to items for medical care that are not medicines or drugs. Thus, equipment such as crutches, supplies such as bandages, and diagnostic devices such as blood sugar test kits will still qualify for reimbursement by a health FSA or HRA if purchased after Dec. 31, 2010, and a distribution from an HSA or Archer MSA for the cost of such items will still be tax-free, regardless of whether the items are purchased using a prescription.

Will I need a prescription to use my health FSA, HRA, HSA or Archer MSA funds for insulin purchases after Dec. 31, 2010?

No. You can continue to use your health FSA, HRA, HSA or Archer MSA funds to purchase insulin without a prescription after Dec. 31, 2010.

I use health FSA funds for my copays and deductibles. Will I still be able to reimburse those expenses with health FSA funds after Dec. 31, 2010?

Yes. Copays and deductibles

continue to be reimbursable from a health FSA after Dec. 31, 2010. Similarly, funds from an HRA can continue to be used for these expenses and a distribution from an HSA or Archer MSA for these purposes will be tax-free.

My company gives me two extra months beyond the end of the year to submit claims for health FSA expenses incurred during the year. What happens if I purchase over-the-counter medicines or drugs without a prescription in 2010 but do not submit the claim for those expenses until January 2011? Will they qualify for reimbursement?

Yes. The new restriction on plan reimbursements for the cost of over-the-counter medicines or drugs without a prescription applies only to purchases that are made after 2010.

My company’s health FSA includes a provision for a grace period, so that if I don’t spend all of the money in my health FSA by Dec. 31 in a given year, I can still use the amount left in my health FSA at the end of the year to reimburse expenses I incur during the first 2 ½ months of the following year. If I buy over-the-counter medicines or drugs without a prescription during the 2 ½ month grace period of 2011, can I still use the amount left in my health FSA at the end of 2010 to reimburse those expenses?

No. The change applies to purchases made on or after Jan. 1, 2011. Thus, even if your employer’s plan includes the 2 ½ month grace period provision, the cost of over-the-counter medicines and drugs purchased without a prescription during the first 2 ½ months of 2011 will not be eligible to be reimbursed by a health FSA.

If my health FSA or HRA issues a debit card that I use to pay for over-the-counter medicines or drugs, will I still be able to use the card to purchase over-the-counter medicines or drugs after Dec. 31, 2010?

Generally, yes, if you have a prescription for the medicine or drug. For expenses incurred in 2010, you may continue to use an FSA or HRA debit card to purchase over-the-counter medicines or drugs (whether or not you have a prescription)

Health Care, From Page 9

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Page 11

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at pharmacies and from mail order and web-based vendors that sell prescription drugs. Starting after Jan. 15, 2011, you may continue to use an FSA or HRA debit card to purchase over-the-counter medicines or drugs at these vendors, so long as you obtain a prescription for the medicine or drug, the prescription is presented to the pharmacist, and the medication is dispensed by the pharmacist and given an Rx number.

For further information, including guidance on purchases of over-the-counter medicines and drugs from health care providers other than pharmacies and mail order and web-based vendors (such as physicians or hospitals), see IRS Notice 2011-5. For guidance on debit card purchases at “90 percent pharmacies,” see IRS Notice 2010-59.

If I use HSA or Archer MSA funds to reimburse the cost of over-the-counter medicines or drugs purchased after Dec. 31, 2010 without a prescription, what taxes will I incur?

If you have an HSA or Archer MSA, the amount of the distribution for expenses that are not qualifying medical expenses will be includable in your gross income and subject to an additional tax of 20 percent.

More InformationFor a copy of the Q&As, see: www.irs.gov/newsroom/article/0,,id=227308,00.html.

For a copy of IRS Notice 2011-5, see www.irs.gov/pub/irs-drop/n-11-05.pdf. For a copy of IRS Notice 2010-59, see www.irs.gov/pub/irs-drop/n-10-59.pdf.

Source: Internal Revenue Service

This CFR Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

Jack Nicar is a Senior Benefits Consultant at CRF Health & Benefits. The company has offices in Tulsa and Oklahoma City. For more information, visit www.cfr-ins.com.

Health Care, From Page 10

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