More than a dozen amendments were filed this week by members of the Senate Finance Committee to protect flexible spending accounts (FSAs). Although a redrafted version of Chairman Max Baucus' "America's Healthy Future Act of 2009" includes a raised cap of $2,500 on annual tax-free contributions to FSAs - initially proposed last week at $2,000 - advocates for the benefit say the "unreasonably low" cap appears to be "discriminating against FSAs which, unlike other provisions in the bill, is not indexed over time."

According to Save Flexible Spending Plans, a national grassroots advocacy organization, the legislation as introduced by Sen. Baucus imposes a cap on contributions that - unlike other provisions in the legislation - would not adjust with inflation. The legislation also proposes limiting the use of the benefit for over-the-counter medications without a doctor's prescription and including FSAs together with major medical plans in an excise tax on high-cost insurance plans.

"It's disappointing that Sen. Baucus has focused his sights on restricting the use of flexible spending accounts," said Joe Jackson, chairman of Save Flexible Spending Plans and CEO of WageWorks, a benefits company based in San Mateo, Cali., in a statement released Tuesday.

"Without a change, many who rely on flexible spending accounts, including individuals and families battling chronic conditions with high out-of-pocket costs, will lose the full value of the benefit and be forced to pay higher taxes and health care costs," Jackson continued.

Included in the reported 564 total suggested amendments to the legislation were proposals to increase or remove the originally planned $2,000 contribution cap, exclude FSAs from the excise tax on high cost health insurance plans and clarify the reimbursement role of FSAs for over-the-counter medications. Save Flexible Spending Plans is considering the amendments filed by eight senators "on both sides of the aisle" that call for (at the least) increasing the cap on FSA contributions a "step in the right direction."

"Without a higher cap, Congress could force plan participants, including many fighting chronic illnesses, to forgo necessary medical treatment, prescriptions and supplies for financial reasons, resulting in a deterioration of health and an increase in hospitalizations and overall health care system costs," said Jackson.

Those threatened by a change to the structure of FSAs include the benefit companies that manage FSAs for employers, employers that offer FSAs to their employees and the millions of plan participants who have come to rely on the benefit to budget and pay for eligible out-of-pocket health care costs, says Jody Dietel, spokesperson for Save Flexible Spending Plans.

But some argue the extent to which the $2,500 cap on FSA contributions would actually have on employees. Only about 20 percent of workers offered an FSA take advantage of it, Paul Fronstin, director of the health research and education program at the Employee Benefits Research Institute told USA Today. And the use-it-or-lose-it rule, which forces participants to decide how much will be needed to set aside in pretax money from their paychecks, is a discouragement to participants who argue the difficulty in predicting health expenses.

The most recent estimate of the average contribution to an FSA is about $1,400, Fronstin said. "So the average person wouldn't be affected" by the $2,500 limit.

Instant Insights /

FSA advocate argues limited relief gained in updated Baucus bill

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