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Forget the whales; Save the FSA!
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It was reported in Roll Call that as Congress considers how to pay the hefty price tag for health care reform, one option under consideration is changing the structure of flexible spending accounts. By changing them, they would reduce the amount contributed free of tax—an effective tax increase. This, in legislative speak, is a “pay for.”
I know from personal knowledge that FSA’s are a tool used by millions of hardworking Americans to manage and pay for health care costs not covered by insurance on a tax-advantaged basis. My company had them. Many employer do.
Limiting the amount of money that can be contributed into FSAs, as some in Congress have suggested, will reduce the value of the benefit and force plan participants to pay higher taxes and health care costs at a time when many can least afford it — an outcome inconsistent with the principles of health care reform. Yet, do we care about consistency if we can get a large government program in Obamacare.
FSAs tend to be as egalitarian as anything in this world. The typical uncovered medical expenses of an employee are unrelated to income. The guy making $50,000 is likely to put away the same $3,000 or $4,000 a year as the guy making $5 million. To be sure, the guy making $5 million gets a deduction at a higher marginal rate than the guy making $50,000, but the concept is the same.
In my corporate experience, and contrary to what some Democrats might suggest, FSAs are not a health care benefit for the rich. Far from it in my experience. In my years dealing with them, and dealing with claims associated with them, I saw FSA participants range from part-time admins to the CEO.
According to Roll Call, the average FSA participant earns about $55,000 annually and uses the benefit to carefully budget and pay for eligible out-of-pocket health care expenses such as routine co-pays, over-the-counter drugs, contact lenses and orthodontic care. That would be my experience as well.
Many with chronic conditions set aside the maximum amount allowed by their employer year after year because they have the greatest health care needs. FSAs are great for those co-pays on medicines and co-pays for doctors. Those of us on 90-day supplies of maintenance drugs loved the FSA benefit for our co-pays. Who hasn’t bought that pair of glasses because the FSA had a balance?
Why gut the FSA at the same time as we are trying to make health care more available? They are the perfect complement to any insurance program.
The House Ways and Means Committee approved health care reform legislation last month that includes a ban on using money set aside in FSAs to buy over-the-counter medications such as aspirin and allergy medications. Maybe OTC medicines shouldn’t be eligible but what about something as simple as Claritin which went OTC. Many insurance programs won’t cover Clarinex because Claritin is available OTC and as a generic. Shouldn’t the FSA cover that? What about canes and walkers and the like?
The FSA is something that anyone with any out-of-pocket medical expenses can use. I only wish I could have one as a free-lance writer!
We should be making them more available and easier to use. They are the ultimate in individual choice and individual control over their health care.
Or could it be that we can’t decide for ourselves how much to put aside and how to use it?
There are reports that the Senate Finance Committee may add a cap on the amount of money individuals can contribute to their FSAs annually. An even bigger pot of pay-fors is out there. The Joint Committee on taxation projected that repealing the tax exclusion for FSAs, health savings accounts and health reimbursement arrangements would save about $68.6 billion over 10 years.
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