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Are You Ready for IIAS?
IIAS is the 
point-of-sale technology used by retailers to accept Flexible Spending Account (FSA) debit cards. Without the IIAS standard implemented, the ability to process FSA cards for payment for Over-the-Counter (OTC) products and prescriptions would not be available.
What is IIAS?
Inventory Information Approval System is an IRS mandate for retailers who accept FSA debit cards. FSA debit cards are issued for use with medical FSAs, Health Reimbursement Accounts (HRAs),and some health savings accounts. IIAS will take place at the pharmacy's point-of-sale system.
How Does IIAS Work?
QS/1's Point-of-Sale system will be enhanced to identify eligible healthcare FSA/HRA purchases by comparing the Global Trade Item Number (GTIN) for the items being purchased against a pre-established list of eligible medical expense items. The list is restricted to "eligible medical expenses" as described in Section 213(d) of the Internal Revenue Code. The eligible medical expenses are totaled and sent to the card administrator processing system which approves the payment based on the coverage under the health plan.
Why Is IIAS Important?
IIAS is the first IRS-approved system for electronic substantiation of FSA debit card charges that is designed for use with over-the-counter drugs and prescription drugs. Due to many technical and educational issues, the small number of FSA vendors who attempted to use proprietary systems were unsuccessful. Because merchants sometimes abbreviate item descriptions on the receipt, it was difficult for Third Pary Administrators (TPA) to determine the validity of items. The problem was complicated by the fact that mixed FSA/non-FSA receipts were not able to split the tax line item without being versed in the sales tax laws of every state and locality in the United States. IIAS solves this by having the retailer identify each eligible item and split the transaction. The "pay and chase" method of requiring receipts for substantiation for FSA debit card charges proved to be burdensome to the consumer when purchasing OTCs that could not be verified. Also, the lack of an auto-adjudication process allows for potential abuse of the flex spending account and FSA cards. With the inception of IIAS and its auto-adjudication process for OTCs, it will reduce the risk of fraudulent or erroneouse charges.
How is the Eligible Medicaid Item Determined?
Eligibility will be determined by a group called SIGIS, the Special Interest Group for IIAS Standards. The group was created to manage IIAS Standards on an on-going basis. SIGIS is composed of a broad range of participants, including retailers, card issuers, third party plan administrators, merchant acquirers, processors, financial institutions, trade association groups, software vendors, and payment card networks.
SIGIS will contract with a company experienced in list management and development to review the list. SIGIS has developed an IIAS standard that is recognized industry-wide, which will enable acceptance of all FSA/HRA payment cards. TPAs will implement a common set of procedures that applies to IIAS transactions at participating retailers. Additional values that were not previously provided will be added to the authorization message, allowing administrators greater flexibility in debit card plan design than had been available before, including support for HSA and restricted-HRA plan designs.
Who is Eligible to Participate in SIGIS?
The group is open to all participants involved in offering, prociessing or accepting healthcare payment cards for FSAs and HRAs. Thus, membership is open to retailers, card issuers, third party plan administrators, merchant acquirers, processors, financial institutions, trade association groups, and payment card associations.
When Will QS/1's Point-of-Sale System Meet the IIAS Standard?
With the release of Service Pack 19.1.0, QS/1's Point-of-Sale system is now fully authorized to process IIAS transactions for QS/1 customer merchants who have become a certified SIGIS member. The IRS deadline for implementation for independent pharmacies is June 30, 2009.