HCR and FSAs

[Foo Fighter]

My apologies if this has been posted before but if so, I didn't see it. I hadn't heard about the new limitations on FSAs until a friend told me about it today. A quick google search turned up the following;

Taxpayers who contribute to flexible spending accounts or health savings accounts:

• Beginning in 2011, only prescribed drugs and insulin will be reimbursable through flexible spending accounts or health savings accounts. As a result, over-the-counter drugs such as aspirin or medical-related items such as bandages will no longer be qualified expenses for HSA or FSA purposes.

• Beginning in 2013, the annual contribution to a flexible spending account is limited to $2,500. The current limit is $5,000.

• The penalty for non-qualified distributions from health savings accounts increases from 10% to 20% in 2011.

http://www.usatoday.com/money/smallbusiness/2010-03-23-health-care-taxpayers_N.htm

So, for those that have plans with high deductibles, they will only be able to put $2,500 into an FSA to pay for that deductible. Same goes for those that have, say, some major dental work planned that they were going to pay for by putting money into an FSA. Also, some meds, like Claritin for example, used to be prescription but have been available OTC in recent years. If Claritin is what works for a patient, why not let them pay for it out of their FSA? Are they trying to get people to switch from OTC to prescription meds with this new rule?

Since I was unfamiliar with the changes to FSAs and HSAs, if anyone has any insight as to why they included these changes in the HCR bill, please feel free to post up.

[MajorChode]

1. The original intent of the FSA was to help out people who didn't have health insurance

...or were under-insured. HCR should fix many of those problems as it makes health care more affordable to people in those situations. The intent of scaling back FSAs is not to encourage people to switch to more costly prescription meds, the intent of scaling back FSAs is to generate revenue to help pay for HCR.

[Statistical]

3. Most people with FSA HAVE health insurance. Everyone with HSA has health insurance.

Health Insurance does not equal health care.

Even with health insurance you still have deductibles, co-pays, co-insurance, etc.

Unless annual out of pocket max is going to be capped at $2500 in 2013 for all insurance plans this rule is plain stupid.

It is just a scam to make health reform look cheaper in CBO score.

[Foo Fighter]

4. That's my take on it too.

I have health care (and I call "health care" rather than "health insurance" because I'm one of the few, very fortunate people that has excellent health care through a non-profit HMO, the key phrase there being "non-profit") and I use my FSA for medical co-pays, prescription co-pays, glasses, deductibles for dental care, etc. as well as some OTC stuff. These things can REALLY add up and it does make a big difference to be able to pay for them from an FSA.

You're absolutely right that if the FSA is limited to $2500, the annual out of pocket max should also be capped at that amount. That's the part that made absolutely no sense to me.

"It is just a scam to make health reform look cheaper in CBO score."

Ahh...OK. Now the whole thing makes sense. Thanks for that.

[Statistical]

2. Well that sucks. I save a bundle putting all otc health expenses on HSA debit card.

Zyrtec, contacts & solution, tylenol, cold medicine, etc.

It may not seem like much but it adds up.

Hell if they were going to fuck us over they could have at least waited till 2014.


As far as why? Simple. Taxes. Limit FSA/HSA you limit tax deductions and people pay more taxes thus the HCR is "cheaper" in scoring.

[Foo Fighter]

5. HSA is different from FSA.

I'll admit the acronyms are a bit confusing so it's hard to keep them straight but there are differences between the two. I've only used an FSA and not an HSA so I'm not sure how the changes will affect you.

However, when they used the term "non-qualified distributions" regarding HSAs, I'll admit that sent up a red flag for me. A few years ago, a friend's employer decided that rather than pay out vacation time when people quit or retire, they would put that money into an HSA for the employee instead. IOW, rather than give the employee the cash payout they had earned, they will force them to invest that money in Wall Street. (And yes, that's where the money goes. They have about 7 or 8 choices of where to invest but that's it. To top it off, the employer justified this by saying this would enable the employer to avoid having to pay SS taxes on those monies. Uh, like we're supposed to see that as a GOOD thing.)

As for the HSA, my friend can use that money to pay for "approved" medical expenditures but since that list is subject to change, I can see where this is nothing more than a scam to once again fleece working-class people money from they have rightfully earned. My friend wants and deserves his vacation time paid out in cash. After all, that's why he has been saving up his vacation time all these years. He was counting on that money when he retires. He had plans for it. Instead, he'll be stuck investing his money with the Wall Street barons he hates in order to get an HSA he doesn't want. I can only hope his employer is somehow forced to rescind this rule before he retires.

"Hell if they were going to fuck us over they could have at least waited till 2014."

Ha, fucking us over can NEVER wait. They're tripping all over themselves in DC to try to prove to their corporate sponsors that THEY can fuck us over better/quicker/faster than anyone else in DC can. After all, that's where the big money is at.