Prepaid debit cards for medical expenses could take a hit because of a provision in the U.S. health care reform law requiring a doctor's prescription for certain over-the-counter medications.

Starting Jan. 1, people will need a doctor's prescription to buy drugs from a list of 16,000 over-the-counter medications to take advantage of health savings or flexible spending accounts' pretax benefits.

The requirement could cause consumers to reduce the amounts they deposit into health savings and flexible spending accounts, according to Ben Jackson, a senior analyst at Mercator Advisory Group in Maynard, Mass. "Once the government starts putting restrictions on things, the users are liable to worry that more are on the way," Jackson said.

At least two issuers, Wells Fargo & Co. and U.S. Bancorp, are not overly concerned about the provision.

"You're starting to see better adoption as the product matures and awareness increases about what the product can offer to the consumer," said Liz Ryan, the head of Wells Fargo health benefit services.

Ryan said the new law will cause confusion among consumers, so the San Francisco banking company is working to educate its health-benefit cardholders about their accounts. HSAs and FSAs hold pretax dollars that consumers set aside, usually in conjunction with their employer health plans, to pay out-of-pocket health care costs. Nonprescription medications currently are eligible for such payments.

FSA funds do not carry over from year to year, so participants must use the funds in their accounts or lose them. HSA users can carry over unused funds or apply them toward supplementary retirement investments.

U.S. Bancorp has not been as aggressive as Wells Fargo in reaching out to its cardholders because the incoming Republican-led House of Representatives still may try to repeal some, if not all, provisions in the health care reform law, said Ralph Bernstein, the Minneapolis banking company's senior vice president of health care payment solutions.

"The last thing we want to do is confuse [cardholders] even more by sending an authoritatively written" communication about the changes, only to have parts of the law repealed later, he said.

Several organizations have expressed concerns about Internal Revenue Service guidelines regarding clarifications on the new law. The IRS has not completed its guidance on processing over-the-counter drugs as prescriptions. The guidelines are open for public comment until Dec. 27.

The National Association of Chain Drug Stores also has expressed concerns about the law's impact on the Inventory Information Approval System, a point of sale technology that retailers and pharmacies use to determine which purchases are eligible for payment with an HSA or FSA debit card. The system must be reworked to account for the new provisions, and pharmacies and retailers will then need to update their systems, according to the association.

The Special Interest Group for IIAS Standards has said the IRS will allow a transition period from Jan. 1 to 15 for merchants to update their systems.

Bernstein said people might encounter some inconvenience if the approval system is not updated in time. Situations may arise in which consumers present prescriptions for over-the-counter medications but the system will not recognize the purchases when debit cards are used for the payment. Cardholders instead would have to file a claim for reimbursement.

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