WASHINGTON--(BUSINESS WIRE)--ECFC, the leading nonprofit organization promoting choice in benefit solutions, applauds the provisions in the discussion draft of the Better Care Reconciliation Act that support and expand consumer-directed health plans, such as Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs).
"All these changes will make HSAs and FSAs more compelling options for consumers seeking to access affordable health care," said ECFC Executive Director Martin Trussell.
Consumer-directed benefit arrangements are of increasing importance to American workers and their families, covering an estimated 100 million Americans. As health care costs continue to rise, many employers seek to protect employees by implementing account-based, consumer-directed arrangements. Individuals that do not have employer-provided health plans are also looking at high deductible health insurance and need a tax advantaged way to save for these higher deductibles. The Better Care Reconciliation Act recognizes the importance of consumer-directed arrangements and provides helpful changes to the current law regarding these arrangements.
Support for FSAs
FSAs enable employees to set aside tax-advantaged funds to pay for future health care expenses. The Better Care Reconciliation Act will eliminate the ACA imposed dollar cap on contributions to an FSA, letting employees contribute more to their FSA to pay for health care expenses. In addition, participants in FSAs, HRAs and HSAs will again be able to be reimbursed for lower-cost over-the-counter prescription drugs from these accounts, enabling them to be thrifty consumers.
Support for HSAs
The Better Care Reconciliation Act will expand who is eligible to make contributions to HSAs and increase the amount that individuals can contribute. The bill will also permit HSAs to be used to pay for insurance premiums on high deductible health plans and for the medical expenses of the HSA holder’s children under 27 years old. Furthermore, the bill provides needed changes to the HSA rules that will encourage employers to continue to offer these accounts as options for their employees and for families to prepare for their health care financing needs.
Excise Tax on High Cost Health Plans (the “Cadillac Tax”)
The potential impact of the Cadillac Tax is causing employers to consider cutting back on health benefits (including consumer-directed health plans) because they are concerned that these arrangements will result in this excise tax being imposed. The Better Care Reconciliation Act tries to address this by pushing back the effective date of the Cadillac Tax until 2026. We understand that because of the Senate budget rules, postponement of the excise tax was the only option available in this bill; however, it is important to know that Congress understands the deleterious effect the Cadillac Tax has on consumer-directed health plans.
ECFC is a leading non-profit organization dedicated to maintaining and expanding employee benefit programs on a tax-advantaged basis. ECFC represents and promotes employee benefit programs through effective lobbying and provides education and awareness to members, compensation practitioners, national opinion leaders and the general public to help advance health care consumerism. ECFC, which was founded in 1981 as the Employers Council on Flexible Compensation, is the single organization that focuses its efforts on preserving, protecting and defending the tax advantaged programs currently available to working families through employer plan sponsors. For more information, go to www.ecfc.org.