Posted by: danielrashke | August 7, 2009

The FSA Cap and Working Americans

As we approach the August recess, without the release of any healthcare reform legislation, many of us are concerned with the prospect that Congress may cap the benefit that many working Americans use to afford their healthcare expenses.  The latest information I hear on the legislative front suggests that the proposal to place a cap on Flexible Spending Accounts (FSAs) is still on the table, with $2,000 being the low edge of the cap’s range.  This proposal is troubling; with it those most affected by a cap on FSAs will be Americans who can least afford to be without it, those who suffer from chronic illness.

Today, an estimated 72 million working age Americans have a chronic condition such as diabetes, high blood pressure or heart disease.  The annual out-of-pocket cost of treatment for chronic conditions ranges from $3,200 to $5,000 — and that’s even with comprehensive medical insurance coverage.  A study conducted by the Robert Wood Johnson Foundation found that the average healthy American with no chronic conditions spends approximately $850 per year on out-of-pocket healthcare expenses.  But for individuals with one or more chronic health conditions, the per year out-of-pocket health related expenses climbs to $4,398, on average.

Americans who suffer from chronic illness often depend on FSAs to help them afford necessary treatments and medicines.  Restricting or capping FSAs will raise taxes on the very people who need this benefit the most.  One of the driving forces behind this recent effort to reform our healthcare system is to ensure that all Americans will be able to obtain the care they need, and FSAs ensure working class Americans will be able to afford that care. The median FSA Participant has an annual income of $55,000.  These Americans use their FSA to pay for necessary out-of-pocket medical care.

Here’s a breakdown of how those FSA dollars are spent:

  • Forty-three percent: on medical expenses, such as hospital admissions and physician visits.
  • Twenty-six percent: on prescription and over-the-counter medications, often used to manage chronic illness.
  • Twenty-one percent: on dental expenses.
  • Ten percent: on vision expenses, such as check-ups, glasses, and contact lenses.

Any capping of these benefits would mean a tax increase on America’s middle class.  TASC holds that because FSAs provide a means for working Americans to pay for essential out-of-pocket healthcare expenses, FSAs should remain an integral part of any healthcare reform package.

New information!

Are you concerned about the possibility of a cap being placed on Flex plans?  If so, we urge you to advocate for your position and express your concerns to your congressional representatives.  It’s easy for you to do just that.  Simply visit, the pathway to Save Flexible Spending Plans.  This national grassroots advocacy campaign is sponsored by the Employers Council on Flexible Compensation (ECFC), a non-profit organization dedicated to the maintenance and expansion of private employee benefit programs on a tax-advantaged basis.

This informational website lets you advocate for your position. It provides a user-friendly way to send a message to your local representatives, to President Obama, and to Vice-President Biden.  It is vital that your elected officials hear your concerns.


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