Flexible Spending Accounts increase unnecessary health care expenditures

[eridani]

They are essentially an expensive way to reward affluent and healthy people for remaining so.

http://articles.latimes.com/2011/nov/20/business/la-fi-hiltzik-20111120

When the latest statement arrived from my dentist, I cursed my dental plan for paying 100% of his fee.

Whatever could explain this absurd behavior? Simple. Of the $1,800 I placed in my flexible healthcare spending account at the beginning of 2011, I still have $1,000 to spend. Whatever we don't use by Dec. 31, we lose.

Like millions of other Americans, in the late fall of every year I face two annoying conundrums. Somehow I have to forecast my out-of-pocket healthcare costs for the coming 12 months, so I know how much to invest in my flexible account, and I have to root around for qualified medical expenses to rectify any overestimate from the year before.

The flexible spending account is a shining example of a government program conceived as a consumer benefit, then encrusted with so many peculiarities that it crosses the line into insanity. Enacted by Congress in the 1970s, the FSA law allows you to place a certain amount of money annually into an account for spending on healthcare items not covered by your insurance — your deductible, co-pays, drugs, medical equipment, chiropractic, etc.

[dkf]

1. He needs to estimate better.

[Atman]

2. I had an FSA years ago, hated it for the reasons stated. Have an HSA now...much better.

Contributions are pre-tax, and you don't lose the unspent money at the end of the year, it just rolls over. It helps that i have a good employer who contributes half of my insurance deductible. It doesn't work for everyone, but it works for me.

[canoeist52]

3. This is the first year we've opted out.

"Even among those who do enroll, the benefit is hardly a working-class gift. Like any tax exemption, it's highly regressive, disproportionately benefiting the wealthy. If your combined federal and state tax rates top out at 50%, then your effective cost for an FSA-covered $1,000 root canal is $500. If you're a file clerk in the combined 10% bracket, it's $900."

It's just not worth the hassle. So many errors from the bank that runs the card. Excess demands for claim documentation are costing us more in printer ink than the savings of a few bucks on our tax return.

[eridani]

4. I used it the year I got hearing aids

A nice reward for having a job with good benefits. It was so annoying to use that I dropped it the next year, and would not consider it unless there were major predictable expenses like that.

[GoCubsGo]

5. Yep. It works if you KNOW you'll have such expenses.

If you already know you'll be spending a certain amount on medical supplies, your kid's braces, day care, or whatever, flex accounts are a great thing. But, for a one-time episode, not so much. Most likely, you wouldn't be saving enough in taxes to make it worth the hassle.

[tammywammy]

6. I put $500 in my FSA

I have predictable expenses - one monthly recurring medication, glasses/contacts. I used the last of it earlier this month. I think the minimum amount you can put into a FSA at my work is $200.

[DesertFlower]

7. we've been using one for years.

even though we have good insurance there are still co-pays and deductibles. next year our deductible is over $1,000 each. hubby needs a lot of dental work that we put off till '12 because we maxed out our spending account back in october. i see a naturapath which is not covered by insurance.

i think there great.

[ProfessorGAC]

8. Me Too

Because of having MS, my copay on meds is VERY steep. There is a tax benefit for us, when i'm paying $1800 a year out of pocket for the medicine.

But, we only put enough away to cover copays on meds. Not for any other medical expenses. That seemed too risky to me.
GAC

[eridani]

9. It's sort of like marriage equality

FSAs are a privilege for those who are comparatively well off and healthy. If you have access to the privilege, not using it doesn't gain anything for those who don't have it, as avoiding opposite sex marriage does not get marriage equality for LGBT people.