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Filed Under:Health Insurance, Individual Health

Health Accounts: Witnesses Clash on Value of FSAs, HSAs

(AP Photo/Kevin Wolf)
(AP Photo/Kevin Wolf)

Using flexible spending accounts (FSAs), health savings accounts (HSAs) and other personal health accounts to buy over-the-counter products helps high-income taxpayers much more than it helps low-income or moderate-income taxpayers.

Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, Washington, made that argument Wednesday at a hearing on use of health accounts to buy over-the-counter products that was organized by the House Ways and Means oversight subcommittee.

Rep. Charles Boustany Jr., R-La., the subcommittee chairman and a medical doctor, says he organized the hearing because of concerns about changes in health account deductibility rules included in the Patient Protection and Affordable Care Act of 2010 (PPACA).

In an effort to reduce the amount of tax deductions consumers can take in connection with the accounts, PPACA lets consumers deduct use of FSA, HSA and health reimbursement account (HRA) funds to buy OTC products only if health care providers have prescribed the products.

The change has had a broad effect, because about 33 million U.S. residents are in families with FSAs and about 11 million are in families with HSAs, Boustany says.

"Too often in Washington, officials make decisions about health care policy based on abstract theories and budgetary scores," Boustany said in a statement.

The witnesses participating in the hearing have shown that limits on use of health account money to buy OTC drugs hurts consumers' access to the products, Boustany said.

One witness, Steven Taylor, chief executive officer of the Sjogren’s Syndrome Foundation, talked about the new rule has affected patients' access to artificial saliva and artificial tears.

Van de Water countered that new PPACA health account contribution and deductibility limits can save about $18 billion from 2010 to 2019 without doing much to reduce patients' access to care.

In 2010, only 39% of all workers even had access to FSAs, and only 37% of the employees offered FSAs ended up using the FSAs, Van De Water said, according to a written version of his testimony posted by the committee.

The average FSA participant contributes only about $1,420 per year, and a low-income or moderate-income worker who contributed that amount would save only $322 in federal income and payroll taxes per year, Van de Water said.

The employer would have to then spend about $60 per year per employee in FSA administration fees, Van de Water said.

Allowing a subsidy for OTC products such as artificial tears without a prescription may make it difficult to determine whether consumers are using health account money to buy personal care products, such as sun screen and cold remedies, Van de Water said.

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