ECFC against Congress proposal for caps on flexible spending account contributions

Amidst the sound and fury of concern over various aspects of President Obama's health care reform proposal, observers too often lose sight of the core fundamental principles on which the President is correct, according to the Employers Council on Flexible Compensation.

“The benefits of the world's greatest health care system are not adequately shared by all Americans,” said Dennis Triplett, chairman of ECFC, and CEO of UMB Healthcare Services. “Health care inflation is unsustainable for families and employers. And the cost of overhauling our system must not be ‘shouldered by families who are already having a tough time.’”

Triplett continued, “Unfortunately, Congress is considering a proposal to effectuate these principles by undermining all of them, and no one is speaking up in defense of the very people the President seeks to help. Specifically, some in Congress want to severely limit citizens' ability to make tax-deductible contributions to flexible spending accounts, or FSAs, in an effort to raise revenue to pay for other reforms. Such caps on FSA contributions would be bad health policy and a punch-in-the-pocketbook for middle income Americans.”

Millions of Americans use FSAs, making tax-free contributions for medically necessary goods and services, to help finance their out-of-pocket costs. Most enrollees are middle income - the average FSA account holder's salary is approximately $55,000. FSAs help healthy citizens pay for wellness programs and to cover vision and dental costs; they help patients cover a myriad of out-of-pocket expenses that inevitably result from chronic conditions; and they help families handle their recurrent but unpredictable children's medical expenses.

“FSAs should enjoy staunch support across the ideological spectrum,” Triplett said. “For moderates and conservatives, FSAs are essential tools for controlling health care costs. They give health consumers some ‘skin in the game,’ exercising greater discretion before purchasing health goods and services with their own resources.”

For liberals and progressives, FSAs are essential tools for those who need the most help. Nearly 72 million working age Americans have chronic conditions such as diabetes, with out-of-pocket expenses of $3,000 - $5,000 or more, even when covered by a comprehensive, low-deductible health plan. The Robert Wood Johnson Foundation noted that out-of-pocket spending for individuals with one or more chronic conditions averages $4,398 per year, far higher that the caps being proposed in Congress. Capping contributions to FSAs will result in lower medication compliance, poorer health, and higher medical bill problems for those who need the most help.

“FSAs are incredibly powerful and effective tools to restrain health spending and promote better lifestyles,” Triplett said. “And they could be improved while saving taxpayer dollars. Ending the current 'use-it-or-lose-it' regulations would help people in their budgeting process, especially if coupled with the ability to roll FSA dollars over from one year to the next.”

Triplett concluded, “It is unfortunate that more politicians are concerned about raising taxes on millionaires than about raising taxes on the middle class and chronically ill by capping FSAs. In fact, this is downright shocking. But policy makers still have time to do the right thing and heed the President's admonition to first do no harm to the 'little guy' when constructing health reform.”

www.ecfc.org