Enactment of New FSA Restriction Will Pose Problems for Consumers, Retailers and Benefit Providers

/PRNewswire/ -- A provision of health care reform could blindside consumers and create an administrative nightmare for providers and retailers as its January 1, 2011 implementation date draws closer. Without intervention, the Patient Protection and Affordable Health Care Act, passed earlier this year, will require consumers to obtain a physician's "prescription" in order to use their pre-tax flexible spending accounts (FSAs) to pay for over-the-counter (OTC) medicines other than insulin. Rep. Earl Pomeroy (D-ND) and industry groups have called for clarification of the new regulations to give providers and retailers an opportunity to educate consumers and develop compliance procedures.

In a letter to U.S. Treasury Secretary Timothy Geithner, Rep. Pomeroy encouraged the Treasury "...to work with consumers and stakeholders to address certain compliance issues in advance of the mandated implementation date." Without clarifying the policy, "...consumers are left confused and frustrated and benefit administrators and retail merchants will be left with increased processing and consumer service costs," wrote Rep. Pomeroy.

An industry group responsible for establishing standards for electronic payment processing for health spending accounts, such as those used to identify eligible OTC purchases, argues additional guidance is needed to clarify how the new regulations will work in practice before it can be implemented. The law currently states that only "prescribed" OTC drugs are eligible for reimbursement; however, it does not specify whether a prescription is required or if a letter of medical necessity will suffice.

"Without clarification on the type of permission needed for FSA reimbursement for OTC drugs, consumers, retailers and third party administrators will be confused and unlikely to fully comply with the new regulations by the start of the new year. Meanwhile, we're likely to see doctor's offices overwhelmed with patients seeking prescriptions to use their spending accounts for Claritin, Zyrtec and other OTC items," said Jody Dietel, president and chair of the Special Interest Group for Inventory Information Approval System Standard (SIGIS). "A delay in implementation will provide time for all parties to be better educated on the issue and prepared to comply with the new rules."

Both Rep. Pomeroy and SIGIS warn that forcing retailers to quickly change their distribution practices for a January 1, 2011 start date will be difficult given the current electronic systems structure, which, in turn, will lead to processing errors, consumer frustration and major challenges for FSA administrators.

"This restriction will hurt millions of consumers who rely on their FSAs to manage their out of pocket health care costs and pay for necessary over-the-counter therapies," noted Joe Jackson, CEO of WageWorks Inc., a benefits company based in San Mateo, California. "If Congress is intent on putting this provision into effect, they should at least push back the deadline so that consumers and especially retailers are ready for the transition."

Currently, consumers may contribute money to their FSAs to cover out-of-pocket medical expenses not covered by insurance, including co-pays and over-the-counter items such as asthma and allergy supplies, aspirin and flu medications.

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Save Flexible Spending Plans Applauds Amendment to Protect Flexible Spending Accounts

/PRNewswire/ -- Save Flexible Spending Plans, a national grassroots organization dedicated to protecting flexible spending accounts (FSAs), praised Sen. Charles E. Schumer (D-NY) for filing an amendment to the Patient Protection and Affordable Care Act that would help protect the future use and value of FSAs. The amendment, filed yesterday afternoon, would adjust for inflation the currently pending $2,500 cap on FSAs, helping to ensure that participants will be able to meet their out-of-pocket health care needs over time.

"We are encouraged that Sen. Schumer filed an amendment to protect FSAs, a benefit relied upon by more than 35 million working American families to manage and hold down their health care costs," said Joe Jackson, chairman of Save Flexible Spending Plans and CEO of WageWorks Inc., a benefits company based in San Mateo, CA. "Without indexing the $2,500 contribution cap for inflation, millions of participants, including those battling chronic illnesses, will see the value of their FSAs quickly erode. The Schumer amendment would solve this problem, ensuring that access to FSAs stays in line with increasing costs. Filing of the amendment further acknowledges the importance and support in the Senate for preserving FSAs as a valuable cost-saving benefit."

Failing to adjust the contribution cap for inflation, as had been crafted in legislation passed by the House of Representatives, will cause the value of a $2,500 FSA to plummet to less than half its worth within a decade.

"Following the September introduction of Sen. Baucus' (D-MT) health care reform legislation, Senate Finance Committee members from both parties offered amendments to protect FSAs," added Jackson. "We are hopeful that once again, Senators from both sides of the aisle will sign on in support of the Schumer amendment and his solution that is critical to protecting FSAs."

Beyond the need to adjust the contribution cap for inflation, there are still concerns about the unreasonably low amount of the cap, which has been proposed. The restrictions will force approximately 7 million hard-working Americans who use their FSAs to pay for out-of-pocket health care expenses greater than $2,500 to pay higher taxes and health care costs. Federal employees who currently enjoy a $5,000 limit on FSA contributions will see their access to FSAs cut in half. Additionally, state employees in 46 states who currently have FSA contribution limits set at $3,000 or more will be negatively impacted. Sadly, those with the highest out-of-pocket health care costs - the sickest - will be hit the hardest by restrictions on FSA use.

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