No, a health FSA can still be used to purchase insulin in 2011, but there are new reimbursement rules for over-the-counter (OTC) medicines or drugs other than insulin.

The Patient Protection and Affordable Care Act (PPACA) established a new uniform standard that, effective January 1, 2011, applies to FSAs, health reimbursement arrangements (HRAs), health savings accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Under the new standard, the cost of an OTC medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, copays and deductibles.

The new standard applies only to purchases made on or after January 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.

Source: IRS Notice 2010-59, I.R.B. 2010-39, September 27, 2010.