FLEXPLAN CONFUSION

If you are concerned about your pretax health plan accounts read on.

Flexible spending account restrictions need fixing
Joe Jackson

San Francisco Chronicle November 21, 2010 04:00 AM Copyright San Francisco Chronicle. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Sunday, November 21, 2010

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When the 112th Congress takes office in January, a top item on the agenda will be health care reform. While any repeal of the Affordable Care Act would be vetoed by President Obama, efforts to fix the new law stand a much higher chance of success. And nowhere can members of the new Congress make a greater positive impact in this effort than by changing the restrictions on flexible spending accounts.


Flexible spending accounts are part of the solution to our health care problems because they encourage personal fiscal responsibility, hold down overall health spending and make necessary medical care more affordable for hard-working Americans.

These accounts, used by more than 33 million Americans, enable participants to set aside a portion of their income, pre-tax, to pay for out-of-pocket medical costs such as co-payments, over-the-counter drugs, vision and dental care.

Unfortunately, the Affordable Care Act's restrictions on these accounts will force millions to pay higher taxes and health care costs at a time when many can least afford it, and will hurt those who need these plans the most - individuals and families battling chronic conditions. The planned restrictions are also counterproductive to the goal of health care reform: to expand coverage, lower costs and improve the quality of care.

For the benefit of consumers, Congress should remedy three limitations to FSAs.

What's ailing: Starting on Jan. 1, FSA participants will need a doctor's prescription to use their FSAs for the purchase of over-the-counter medications. It is absurd to require anyone to get a prescription for Tylenol, Claritin or similar drugs, and an utter waste of both consumers' and physicians' limited time.

In fact, this confusing and burdensome provision will drive up the cost of health care because many FSA participants will have to schedule additional doctor's appointments to get a prescription.

Remedy: During the lame duck session, Congress should repeal or, at a minimum, follow the recommendation of leading industry groups and delay implementation of the requirement in order to give retailers, administrators and health providers an opportunity to educate consumers and develop compliance procedures.

What's ailing: FSA participants are required to spend all of their annual contribution before the end of the calendar year (or, in some cases, an extension deadline), or those funds are forfeited to the employer.

This "use it or lose it" rule often discourages people from taking advantage of FSAs for fear of losing any remaining balance. This rule is also unnecessary now that a contribution cap is set to go into effect.

Remedy: Congress should fix this flawed rule by allowing participants each year to roll over up to $500 or cash out unused FSA funds.

What's ailing: The Affordable Care Act imposes a $2,500 annual cap on FSA contributions, effective Jan. 1, 2013. This cap will harm approximately 7 million FSA participants whose out-of-pocket health care expenses exceed the cap - many of whom may suffer from chronic illnesses.

Remedy: To keep health care affordable, Congress should reset the cap to a nonpunitive level, say $5,000.

As health care costs head relentlessly higher, Congress should act swiftly to take these three important steps to protect flexible savings accounts from becoming an unintended victim of health care reform, and allow these plans to continue to serve as a safety net and a fiscally responsible solution that enables millions of Americans to receive affordable health care coverage.

Joe Jackson is chairman of Save Flexible Spending Plans ( www.savemyflexplan.org), a national grassroots advocacy organization that protects against the restricted use of flexible spending accounts, and CEO of WageWorks Inc., a San Mateo benefits provider. Send your feedback to us through our online form at SFGate.com/chronicle/submissions/#1.

This article appeared on page E - 4 of the San Francisco Chronicle


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