New federal law will benefit O-T-C shoppers

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NEW YORK — The Coronavirus Aid, Relief and Economic Security (CARES) Act, which became law in March, contains a provision that could help many consumers cut their health care costs. The only problem is that most consumers are probably not aware of the provision and what it means.

The CARES Act provision allows consumers with flexible spending accounts (FSAs) or health savings accounts (HSAs) to once again use funds in those accounts to pay for many O-T-C medications, including feminine care products.

(A rule change in the Affordable Care Act changed the reimbursement rules in a way that essentially denied most people the ability to use their FSAs or HSAs when purchasing O-T-Cs. Prior to that rule change, 52% of households with FSAs had used those funds to purchase O-T-Cs, according to Nielsen.)

Glaxo­Smith­Kline (GSK) points out that most consumers remain unaware of the recent changes in the CARES Act that could benefit their pocketbooks. Only 29% of shoppers know that they can now use their FSA or HSA benefits on many of their O-T-Cs, and just 12% say they have used their FSA or HSA funds on these products, according to data provided by GSK. But consumers are interested in doing so, with 65% of account holders saying they are likely to use their FSA or HSA to buy O-T-C products this year.

“We see a significant role for O-T-C retailers to play in educating their shoppers about the change, as well as helping them take advantage of their benefits,” says Tom Rinck, director of customer and industry development at GSK. “GSK is building a shopper education portal to help people understand the change and what products are newly eligible, as well as how to think ahead to plan their contributions for next year to account for their O-T-C spending. We look forward to partnering with retailers to share this educational platform and to support their in-store and digital activations to bring this closer to shoppers.”

Today, more than 50 million American families rely on FSAs and HSAs to pay for medical and dental expenses that fall outside of traditional health insurance coverage, which is why this particular rule change has the potential to provide significant savings to millions of Americans who currently use these accounts, and to many more who may be eligible but are not currently taking advantage of this benefit.

The average American household spent almost $5,000 per person last year in out-of-pocket health care expenses and insurance premiums, and each year households in the U.S. spend an average of $442 on O-T-C products, which means that the tax savings a household could realize by using pretax dollars for those products could be upwards of $100, depending on income.

And because flex spending accounts have a “use it or lose it” provision that requires contributed funds to be used within the calendar year, or be forfeited, Americans collectively lose as much as $400 million annually in forfeited FSA balances. Consumers will now have the opportunity to use some of that money to buy needed O-T-C medications.

Rinck points out that retailers now have an opportunity to connect with their shoppers to educate them on the change and to help them understand which products qualify, and how to use their accounts when purchasing these now eligible items. The change in eligibility requirements also benefits consumer packaged goods companies, Rinck believes, by making products more accessible to more people and allows people to have more control over their health care spending. For instance, using pretax money might mean that shoppers can afford to stock up on the products they want to have on hand going into the cold and flu season, or to plan ahead for their digestive health or pain management needs. “This puts the consumer in better control of their health,” says Rinck, “which is a great benefit of O-T-Cs.”

Rinck sees the change as good for the overall U.S. health care system. By expanding the affordability of and access to O-T-C medications, it provides safe and effective treatment and relief to many common ­conditions.


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