Posted by: danielrashke | July 23, 2009

Off Again…On Again

What was off the table a week ago appears to be back on, at least partially.  During the last several months, as promised, I have kept close watch on the healthcare reform effort.  As the reform process has progressed, potential impact to our industry has varied considerably.  At one point, elimination of Flexible Spending Accounts (FSAs) was a real possibility.

Due to the efforts of many folks in our industry, FSAs are not likely to be eliminated.  This is good news.  Meanwhile, of course there is still a long way to go before any reform bill is final.  While today we expect FSAs will remain part of the healthcare landscape, feedback from Washington suggests two impending impacts to FSAs.  First, amounts contributed to FSAs will likely be capped.  Various Congressional staff members indicated such a cap will be between $1,500 and $2,500, most likely.  Second, it’s very possible that over-the-counter (OTC) drugs will be removed as an FSA eligible expense.

If I had the chance to sit with my legislator, here are some of the points I would make:

  • FSAs remain a critical component in managing healthcare costs.
  • A cap on FSA contributions should be set as close to $3,000 as  possible (and indexed annually as appropriate). A lower cap would dramatically affect the majority of employees who count on FSAs to manage their healthcare costs.
  • FSAs should be enhanced to eliminate the “use-it-or-lose-it” provision.
  • The OTC deduction helps control the cost of prescription medications and should remain.

As I see it, there are a couple of reasons why FSAs are back on the table.  First, capping FSAs and/or eliminating the OTC deduction would raise some of the revenue needed to finance the reform.  With a price tag still hovering in excess of one trillion dollars, Washington is considering every means possible to raise revenue for this effort.  Second, Democrats could use this proposal as a bargaining chip.  In exchange for some Republican votes, the Democrats won’t touch the Health Savings Account and will give a little on FSAs.  That’s how the game is played in Washington, give a little…gain a little.

Whatever the reason, this illustrates why nothing is certain until some bill is signed into law.  We are still a long way from that.  I’ll keep you posted.


%d bloggers like this: