What Every Pharmacist Needs to Know About FSA Cards


By Tom Greenhaw

Flexible spending accounts are designed to give consumers more control over their health care spending, but many consumers and pharmacists find these cards quite confusing. When flexible spending accounts were first initiated, restrictions were put in place to limit the spending on these cards to medical and pharmaceutical items only. Confusion quickly arose because while these restrictions were in place, there was no system to enforce them. In response to this loophole the IRS has put in place guidelines that restrict where FSA cards can be accepted.

If you find that your customers are having trouble using their FSA cards in your pharmacy it is important to take the necessary steps to resolve the problem. FSA customers can be very valuable, and handling them properly is a great way to build customer loyalty and help your store stand out from the competition.

Are FSA Cards Being Declined at Your Pharmacy?
Some pharmacies may find that a large percentage of customer’s use FSA cards. The amount of FSA cards you see at your pharmacy largely depends on how many businesses in your area provide them as a benefit to employees.

In creating the guideline effecting FSA cards, the IRS has made pharmacists responsible for making sure all customer purchases made with the FSA card are legitimate health care expenses. Since July of 2009, pharmacies are required to use an IIAS capable point of sale system that is able to separate health care items from other items in the store. There is one exception to this, which is the so-called “90-percent exemption”. If 90% of your pharmacy’s gross sales are prescriptions or FSA eligible over-the-counter items, you qualify for this exemption.

Why Are FSA Cards Being Declined?
There might be a few reasons that FSA cards are being declined at your pharmacy. First, this IRS guideline went into effect last year, so if you haven’t done anything yet then every FSA card will be declined. Other pharmacies that opted for the “90-percent exemption” are seeing FSA cards decline in certain cases as well. This is because some FSA plan administrators are only authorizing transactions that have come from an approved point of sale system.

If your pharmacy does use an approved point of sale system and you still have FSA cards being declined, there may be a few reasons. In many instances, the reason for the decline is simply because the customer doesn’t have enough money in their account to cover the purchase.

How Can I Accept FSA Cards?
In order to accept FSA cards, your pharmacy needs to either use an approved point of sale system or apply for the “90-percent exemption”. The first step in this process is to become a member of the Special Interest Group for IIAS Standards (SIGIS). SIGIS is the trade organization that was specifically formed to create a standard solution the pharmacy industry could use to meet the requirements laid down by the IRS.

To help meet that goal, SIGIS publishes an eligible product list that participating retailers can use to determine which items can be purchased with an FSA card. Additionally, SIGIS also certifies point of sale systems that handle FSA cards properly. If you use a SIGIS certified point of sale system, the software uses this list to determine which items can or cannot go on the customers FSA card.

There is a lot of confusion around what a pharmacy needs to do in order to accept FSA cards. If you’d like to accept FSA cards at your pharmacy, here’s a step-by-step process to follow:

1) Become a SIGIS member. SIGIS membership is important because they will provide you with the FSA eligible product list, as well as put you on the list of certified pharmacies.
2) Determine if you will be using an approved point of sale system, or opting for the “90-percent exemption”. Remember, some FSA cards may still be declined if you opt for the exemption.
3) Complete the proper SIGIS certification form. There are two certification forms, and you’ll determine which one to fill out based on your decision at the previous step.
4) Once your pharmacy is certified, SIGIS will inform Visa, MasterCard, and the various FSA plan administrators. It may take up to two or three weeks for these companies and organizations to place you on their list of certified pharmacies.

Future projections show FSA card usage increasing as more employers offer it as a benefit to their employees. Finding the right solution should be an important business goal for your pharmacy.

Tom Greenhaw is the founder of Cashier Live, a provider of web-based point of sale software for pharmacies. Tom has worked with independent pharmacists for years, and in that time has helped guide over 100 pharmacists through the process of accepting FSA cards. If you’d like to find more information about accepting FSA cards, please visit http://www.cashierlive.com/pharmacy.

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