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  • Side Effects: The Beginning of the End for FSAs

    “If you like your current health coverage, you can keep it.”  It was a key promise of Obamacare.

    But the new law gives government a say in everything from the benefits you carry to the treatment you receive.  And that means very real changes to existing coverage.  One of those many changes derive from new restrictions on flexible spending accounts (FSAs).

    FSAs allow users to put aside pre-tax dollars for out-of-pocket health expenditures such as co-pays, deductibles, eyeglasses, and dental work.  Typically, it cuts out-of-pocket costs by around 20 percent.  FSAs are especially valuable for consumers with chronic illness and others who have large foreseeable medical costs (families: think orthodontics!). And because FSA funds cannot be rolled over year to year, the accounts encourage responsible budgeting and use of health services.

    Unfortunately, as The New York Times outlined recently, Obamacare sends FSA users an irresponsible message:  stock up now before the law takes full effect.

    Beginning in 2013, new regulations will prohibit FSA expenditures on certain health aids, such as over-the-counter drugs used by many to control chronic illness.  Furthermore, FSA contributions will be capped at $2,500 per year.

    One side effect of this arrangement:  people suffering from chronic diseases will wind up spending more on co-payments for prescription drugs and doctor visits.

    The New York Times gives the example of the Laskin family, who use every penny of their $4,000 FSA each year to pay for the prescription medication, over-the-counter drugs, vitamins, and doctor visits needed to control chronic illness.  Under the new law, they “may find it more difficult to fit health care into an already squeezed budget.”

    Advises Jennifer Calhoun, a principal with Mercer Health and Benefits, “There are still about two-and-a-half years before the lower flex-spend maximum takes effect. If you know a big elective medical or dental procedure is in the offing — like Lasik surgery, braces or long-needed tooth implants or caps — you may want to schedule these treatments while you can still pay for a big chunk of the out-of-pocket expenses with pre-tax dollars.”

    It’s enough to make you wonder:  If it’s smart to take care of your medical needs before Obamacare kicks in, maybe you’d be better off without Obamacare at all.

    Rick Sherwood currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/About/Internships-Young-Leaders/The-Heritage-Foundation-Internship-Program

    Posted in Obamacare [slideshow_deploy]

    10 Responses to Side Effects: The Beginning of the End for FSAs

    1. Dennis Social Circle says:

      They do not care if it works, fix it and make a mess out of it. Those that are put into office in 2010 must know that we the people want this thing repealed and do it fast.

    2. Lloyd Scallan - New says:

      Just wait! We are just starting to learn what is in Obamacare. Peloci said it all.

      It's now passed, so we are now learning what is in it. It's too late. Thanks Obama and the Dems.

    3. Brad, Detroit, MI says:

      Perfect example of killing ideas that work – FSA’s or HSA’s – so the government can exert more control over YOUR money. I have used variations of an FSA or HSA and am able to stock up and stash pre-tax dollars into my “rainy day” medical fund for future use. With a family of 5, you never know when you are going to need it, and with a cap that is nearly equal to my current yearly expenditure, there goes that idea . . .

    4. Jody L. Dietel, CFCI says:

      Actually, beginning January 1, 2011 the ONLY change to Health FSAs is an inconvenient requirement to obtain a written doctor’s prescription for OTC medicines. In fact, people generally only take OTC medicines their physician would agree are necessary to treat illnesses or conditions. So, while the change may be bad health policy, driving up costs to the very system health reform is supposed to make more cost-effective, it doesn’t in ANY WAY limit the eligibility of these items.

      So, we’re urged to see our medical practitioners to obtain those written directives…take advil for the pain in your back, pepcid AC for heartburn, claritan for allergies and robitussin for your cough. That’s what I will do…and they’ll be covered by my FSA.

      Inconvenient, yes. Expensive to the health system? Probably more so than the revenue estimates expected from this limitation. Make sense? No. study after study shows the effectiveness of OTC medicines in eliminating waste in the health system.

      I believe that Health FSAs will become more popular as the public becomes more aware of what’s in the bill and that out-of-pocket costs don’t go away. I do agree that the next few years will be a great time to maximize the tax advantages while you can, without the $2500 limit that will go into effect in 2013.

    5. Sam T, Milwaukee WI says:

      You think it will be easy to get a prescription for an OTC medication? The system is going to be clogged with too many people and when you need a prescription, you won't be able to get in to see the doctor. Scenario: sinus headach on a Saturday- you want Tylenol Sinus – but first you're going to have to call an on-call doctor, explain your full medical history and then ask for a script for OTC drugs? Think again. And furthermore – what't the impact for eyeglass providers? I've always had the luxary of having 2 pairs of glasses, thanks to my FSA – now I'll cut back to one and will probably cut back on my annual visits. Thanks Mr. President! What a mess.

    6. Anna, Illinois says:

      The FSA is one of the mechanisms that kept Indiana's deficit at 4.0% This is one of the provisions of the Healthcare bill that may have to be reassessed.

      However, the Patient Bill of Rights should stay in tact. And Insurance Companies will only have accountability when the Senate Judiciary Committee moves forward to Repeal the McCarran-Fergusen Anti-Trust Exemption that the House overwhelmingly passed. There is no greater frustration when you can get a group of 431 to act in the interest of capitalism, the unions, and individual policy holders only to Watch 12 Angry Men Put their own interests ahead of that of their Insurance Paying Constituents. Every 48 hours that this bill does not pass, I will add another Senator from the Party of my choice to the Persona Non Gratis List.

    7. Jeanne, Minneapolis says:

      Even if you can get a prescription for an OTC from your doctor, as with drugs that are not on the Formulary, insurance won't cover them. The Feds are probably going to have a formulary of their own listing all the OTC's. So regardless of a prescription you probably won't be able to get them through your FSA or HSA anyway.

    8. Mark, New Jersey says:

      I was a supporter of Obama and health care reform. This stupidity shows he pulled the wool over my eyes.

      This change will raise my cost of healthcare; not lower it. I commonly take OTC medicines for various ailments and my FSA helps to cut the costs. Now to buy them with my FSA, I'll have to make a Drs. appointment, take time off work to go, and pay my copay. That would cost me around $80.

      I've had years when I've known I'd have a lot of medical expenses (like my wife expecting a baby, for example) so I'd put a lot into my FSA. No more.

      Obama will never be re-elected.

    9. Bob Keller, Woodbrid says:

      I just learned about the reduction/elimination of FSA's at our corporate meeting last week. Needless to say I was very upset with the news. The last three years I've maxed out mine just to cover the braces of my wife, two teenagers, and, now, a son in college wanting them. Whether or not ObamaCare gets repealed or my full FSA reinstated by then, it won't matter. At least the braces will all be paid for! FYI: my wife, the lefty, hasn't said a peep once I told her about the "great" news that her imperious president's health plan was gutting the FSA that she's been relying heavily on. We all know she's not alone…

    10. Pingback: Today in Washington - September 23, 2010 | RedState

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