The New York Times has a very good story today on the subject of flexible spending accounts — employer-managed accounts that allow Americans to use pre-tax dollars to pay for over-the-counter medical costs ranging from braces and glasses to vitamins and antacids.
But the Affordable Care Act will place a $2,500 annual limit on the accounts (there is currently no limit), thus adding to the health-care costs of many Americans:
[C]hronically ill people and others who now aggressively use their flex-spend accounts (say, parents with two teenagers who need braces) will feel the financial squeeze of the lower maximum.
Take Susan Luskin of Hollywood, Fla. Ms. Luskin, 58, suffers from Crohn’s disease, an inflammatory intestinal condition. And her husband, Paul, 61, is being treated for diabetes, high blood pressure and high cholesterol. Together they spend $350 a month on co-payments for prescription drugs.
Those costs, along with doctor visits and the over-the-counter vitamins Ms. Luskin must take for deficiencies caused by her disease more than absorb the $4,000 flexible spending contribution her company allows. “And that doesn’t include any vision or dental bills,” Ms. Luskin said.
“When the new limit comes in, I’ll be paying more out of pocket and losing the tax break,” Ms. Luskin added. “People on a tight budget who are ill will feel the difference.”
Ms. Luskin, who runs a company that administers flex-spend accounts and health savings accounts for Florida businesses, notes that people who use the high limits on their current plans often do so as a way to budget for their health care costs in the coming year.
“They know the money is put aside for health care needs,” she said. With a lower limit, these employees may find it more difficult to fit health care into an already squeezed budget.