Is the Remedy Worth The Administrative Headache?
On September 3, 2003, the IRS issued Revenue Ruling 2003-102 (the “Ruling”). The Ruling paves the way for employer sponsored health plans to reimburse many over the counter (OTC) drugs on a tax-free basis. Prior to the Ruling, many had interpreted applicable law to provide restrict tax-free reimbursement to drugs that could only be obtained with a prescription. Overall, the clarification that “eligible medical expense” under Section 213(d) includes OTC drugs is a good thing for both health plan participants and plan sponsors; however, the administrative complexities associated with processing OTC claims may be enough to force even the most tolerant claims adjudicator to reach for the aspirin, ibuprofen, or other OTC painkiller. We discuss below the scope of the Ruling, the administrative complexities associated with adjudicating OTC claims, and plan design considerations for plan sponsors.
