Impacts of Health Care Reform on Flexible Spending Accounts

Almost every American is going to be affected by the new changes brought into law under the Health Care Reform Legislation. One of the most notable changes that will affect thousands is the alterations that have been made concerning Flexible Spending Accounts.Children Aged up to 26One of the biggest new changes is the new requirement that any group health insurance plan now needs to cover children aged up to 26 years old. This new change will apply to any plan years beginning on or any date after the 23rd September 2010. Note that the majority of plans however, are based on a calendar year and so they won’t be required to start covering these adolescents until the 1st January 2011.Starting from the 30th March 2010, parents will be able to pay for any medical expense for their children using a Flexible Spending Account, irrespective of their tax dependency status, so long as that child does not become 27 during that tax year. So long as employer approval is granted, employees will be able to increase the amount of contributions into a Flexible Spending Account at any time, in order to pay for the medical expenses of any of their dependents aged up to 26 years.Over the Counter DrugsWhile over the counter drugs are still eligible, beginning from the 1st of January 2011, it will be necessary for claimants to produce either a prescription or a letter stating medical necessity, in order to receive reimbursement of the cost of such medicines from a HRA, HAS or FSA. While essential medicines, such as contact lens solution, insulin, bandages and any kind of durable medical equipment will still be covered without needing a prescription, other drugs such as paracetamol and aspirin will no longer be covered.Contribution LimitsThe amount of contributions people can make each year will be lowered significantly. Annual Flexible Spending Accounts contributions will be limited to $2,500 for any tax year that begins after the 31st of December 2012. Previously, most FSA’s had no such limits, though some employers would place limits at around $4,000 to $5,000 per year. From 2014, the new limit will be allowed to increase annually to take into account rising inflation.It is thought that the new limits on FSA’s will make it more attractive for employees to make contributions instead to a Health Savings Account, which is specifically geared towards setting aside pre-tax money to pay for tax free medical costs.