WASHINGTON Save Flexible Spending Plans — a national grassroots advocacy organization sponsored by the Employers Council on Flexible Compensation — on Thursday called on the new leaders in Congress to follow through on their campaign promises and fix problems with the healthcare-reform law, including the removal of to-be-imposed restrictions on employer-provided flexible spending accounts.
The two restrictions that are part of the Patient Protection and Affordable Health Care Act that are of greatest concern, according to SFSP, are the Jan. 1, 2011, requirement that over-the-counter medicines be prescribed in order to be eligible for reimbursement from a flexible spending account and the Jan. 1, 2013, cap on FSA contributions of $2,500 per year.
“It was never a good idea to fund health reform on the backs of hardworking Americans who use flexible spending accounts to manage and contain health costs,” stated Joe Jackson, chairman of Save Flexible Spending Plans and CEO of WageWorks, a benefits provider based in San Mateo, Calif. “To improve and fix the health-reform law, Congress should quickly repeal the requirement starting Jan. 1, 2011, that a doctor’s prescription is needed for consumers to use their flex accounts to purchase over-the-counter medications, including Claritin, Zyrtec and Tylenol. This provision will not only drive up healthcare costs, but it [also] is an utter waste of consumers’ and physicians’ limited time.”
In addition, SFSP recommended that Congress preserve the usefulness of FSAs by removing the “use it or lose it” provision and actually increasing the contribution cap.
Today, FSA participants are required to spend their entire annual election before the end of the calendar year — or, in some cases, an extension deadline — or those funds are forfeited and returned to their employers. This “use it or lose it” rule often discourages individuals from utilizing FSAs to save on their healthcare expenses for fear that they will lose any remaining balance. Additionally, this forfeiture rule is no longer necessary now that an FSA contribution cap is set to go into effect on Jan. 1, 2013.
Rather than forcing consumers to forfeit or spend unused money at the end of a plan year, Congress should revise the rule to allow participants each year to roll over up to $500 or cash out unused FSA funds. With participants paying taxes on those funds or rolling over dollars into the next year, either solution would generate additional revenue for the federal government, SFSP proposed.
The future cap on FSA contributions will force approximately 7 million Americans who use their FSAs to pay for out-of-pocket healthcare expenses that exceed the $2,500 limit to pay higher taxes and healthcare costs. Americans with the highest out-of-pocket healthcare costs — those with chronic conditions or children with special needs — will be hit the hardest by this restriction. According to the Robert Wood Johnson Foundation, individuals and families with chronic illnesses incur annual out-of-pocket expenses that average $4,398 per year, which significantly exceeds the proposed $2,500 cap.
Amore appropriate response is for Congress to set a cap at $5,000, SFSP suggested.
“FSAs are a lifeline for working Americans, often making the difference between staying afloat and going into debt over healthcare needs — and sometimes between getting necessary treatment and avoiding it altogether because of the cost. They enable participants to play an active role in managing their health care and should be preserved,” Jackson added.