Curbing FSAs Could Help Pay for Health Care Reform
Posted June 4, 2009 by admin
Curbing FSAs Could Help Pay For Health Care Reform
Center on Budget and Policy Priorities
Chuck Marr and Kris Cox
Congress should consider scaling back or eliminating health care flexible spending accounts (FSAs) [1] as part of its effort to pay for health care reform. This paper, which is part of a series of papers on proposals to help pay for health reform, outlines several ways in which Congress could curtail FSAs.
FSAs are designed to allow employees to pay out-of-pocket health care costs with pre-tax dollars. Employees have a set amount deducted from each paycheck to be deposited in their FSA — free of any income or payroll tax — from which they are reimbursed for out-of-pocket health care costs they incur during the year. FSAs, however, suffer from significant flaws.
