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"Less" Flexible Spending Accounts


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If you are one of the many Americans who have a Flexible Spending Account (FSA), consider yourself warned: changes are on the way, and they won't benefit you.

Flexible spending accounts allow workers to use a portion of their earnings to pay for health-care expenses. Workers can set aside a portion of their salary in an FSA and not pay income taxes or Social Security or Medicare taxes on that money. The savings can add up and provide significant help to families. For example, an allergy sufferer could use an FSA to pay the costs of over the counter allergy medication, or a family may use an FSA to defray the cost of a child's braces.

The new "Obamacare" law made changes to FSAs. It limited the amount that can be contributed to an FSA to $2,500 annually -- that limit will kick in 2013.

The new law also levies greater restrictions on the purchases that an FSA can cover. Specifically, an individual can no longer use FSA funds for over the counter medications unless a doctor prescribes them. Here's how an individual would go about getting the purchase approved for FSA use, according to the Internal Revenue Service: "[D]ocumentation could consist of a customer receipt issued by a pharmacy that reflects the date of sale and the amount of the charge, along with a copy of the prescription; or it could consist of a customer receipt that identifies the name of the purchaser (or the name of the person for whom the prescription applies), the date and amount of the purchase and an Rx number." All for a bottle of aspirin. The restriction is yet another bureaucratic headache for Americans who are simply trying to control their own health-care costs. The health-care law is filled with headaches; the new FSA rules are just a small sample.

Indeed, a recent survey conducted by United Benefit advisors found that health insurance premiums will increase by about eight percent in 2011, with a quarter of plans likely to experience a 13.9 percent increase. The Wall Street Journal reported in October that "corporate health-care costs would rise by 10 percent if firms made no changes to their plans. Many are finding that they have little choice but to switch a greater share of costs to employees."

The implementation of Obamacare is off to a shaky start, to say the least. And many employers may likely face even tougher decisions in the future. For example, some employers were able to "grandfather" their current plans and avoid adopting some of requirements of the new law (and thus stave off additional costs.). But the Wall Street Journal reports, "Costs are rising too fast…and making changes to their current health plans is the only way to keep premiums lower."

So many plans simply will not be able to maintain their "grandfather" status. Meaning? Even if you like your insurance, you won't be able to keep it, because it won't be there!

Americans' health-care costs are rising, and, at the same time, they are losing opportunities to save on their health-care costs, such as through the changes to FSAs. They are being hit from both sides. It's no wonder that a majority of Americans continue to oppose Obamacare and want to see the next Congress repeal and replace it with something better.

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