Health plan reimbursements expand

The IRS recently ruled that group health plans – including flexible spending arrangements and health reimbursement arrangements – are permitted to reimburse participants for certain over-the-counter medicines such as antacids, pain relievers, allergy medications, and cold medicine.

Still not reimbursable are vitamins, dietary supplements, toiletries, cosmetics and other items that are beneficial to general health but are not specifically for medical care. Participants still must provide the plan with proof that the medicine was purchased.

Unanswered questions are: How does a plan determine who the over-the-counter medicine was purchased by or for? If an employee purchases the medicine in bulk (say, enough aspirin for the next five years), how much is currently reimbursable?

Your plan sponsor should review the language in your current coverage. If it is broad enough, reimbursement for over-the-counter medicine may be required unless the plan is amended. For example, if the plan says it will reimburse all expenses for “medical care”, then the plan will be required to reimburse for over-the-counter medicine.

If the language is narrow, reimbursement for over-the-counter medicine may not be granted unless the plan is amended. For example, if the plan says that only prescription medication is reimbursable or if the plan says that only expenses that are deductible can be reimbursed.

Remember that plans are not required to reimburse for over-the-counter medicines. Consider drafting a specific schedule of the types and amounts of over-the-counter medicines that will be reimbursed. Check that the plan and the summary plan description reflect your choices as to whether these medicines will be reimbursable.

Your summary plan description is the principal document to inform employees about a benefit plan. It is required to be understandable and to reasonably apprise employees of their rights and obligations.

Further, employee benefit plans must be operated in accordance with the terms of the plan document, which is only briefly described in the summary plan description. The federal courts have decided that the terms of the summary plan description control over the actual plan document when the terms of the two documents conflict. The courts have rationalized these decisions by observing that Congress made the summary plan description the document to inform employees about a plan and, therefore, require it to be accurate, comprehensive and understandable.

Court cases on this issue can be categorized into two groups.

In several cases the summary plan description was plainly wrong, such as indicating that sick leave counted for plan purposes when it clearly did not.

In other cases, the summary plan description omitted a condition or limitation contained in the plan. Cases such as these are troubling. Given the complexity of employee benefit plans, is it possible for the summary plan description to include all conditions and limitations to benefits and still be a summary that is understandable to the average participant?

One court has held that, even though the entire policy terms were included in a summary plan description for group life insurance benefits, the conflicting summary controlled over the policy terms. With this reasoning, providing a copy of the entire plan document will not lessen the risk that some provision in the summary may be the basis for a claim that would not be meritorious under the plan document.

The only way to minimize the risk of a summary plan description trumping the plan document is careful and thorough review of conflicts in the documents.