Cost saving benefit faces eventual elimination without relief

Despite Speaker Nancy Pelosi's (D-Calif.) support of President Obama's pledge not to raise taxes on the middle class, the House of Representatives is now considering -- outside of the normal legislative process -- adopting provisions approved yesterday by the Senate Finance Committee that would drastically restrict the use of flexible spending accounts (FSAs) in order to help pay for health care reform.

The restrictions, which include an unreasonably low cap on contributions to this tax-advantaged benefit that wouldn't adjust with inflation, would quickly de-value the benefit and possibly lead to its elimination, over time.

"This would be the season of broken promises if the House Democratic leadership plans to raise taxes on the middle-class by restricting the use of FSAs -- a benefit used by over 35 million working Americans to hold down their health care costs," said Joe Jackson, chairman of Save Flexible Spending Plans and CEO of WageWorks, a benefits company based in San Mateo, California. "Worse yet, the House would bypass the standard legislative process and abandon due diligence by including this ill-conceived policy in its health bill without the standard committee hearings or debate."

Provisions approved by the Senate Finance Committee now being considered in the House include a proposed $2,500 cap on FSA contributions that would not adjust with inflation. Failure to index the cap for inflation will cause the value of a $2,500 FSA contribution to plummet to $1,250 in just nine years.

"It doesn't make any sense that the House would want to pay for health care reform by overly restricting FSAs and raising taxes on millions of people, especially those who are the sickest," added Jackson. "FSAs are a lifeline for working Americans, often making the difference between staying afloat and going into debt over health care 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 as a safety net for middle-class Americans struggling to afford rising health care costs."

In July, the House Ways and Means Committee also approved health care reform legislation that includes a ban on using money set aside in FSAs to buy over-the-counter medications such as aspirin and allergy medications.