Wednesday, October 28, 2009

Open Enrollment and The Many Layers of the U.S. Healthcare Bill

As many people know, Congress has supposedly been working to address healthcare reform ever since President Obama gave his first U.S. press conference earlier this year. Much has been said about it, including more than a few legitimate (and illegitimate) critiques. But this bill is really a monster, and includes a number of seemingly unrelated items to healthcare reform. Since Congress hasn't accomplished all that much this year (besides bickering with each other), there is some effort to throw everything into the bill since it may very well be the ONLY piece of legislation Congress actually votes on this year.

But aside from efforts to address universal coverage, what else is in there?

A few things that people with diabetes may wish to beware of.

Well, its October 28, 2009, and we're reaching the last stretch of the year. Presently, this is the time many people are faced with what's known as "open enrollment" for healthcare plans and various other employee benefits.

The New York Times "Well" Health Blog writes that several experts in the field of employee benefits are saying "When Your Open-Enrollment Envelopes Arrive, Open Them".

They argue that "Doing nothing is no longer an option. Many companies insist you fill out open-enrollment forms even if you intend to stay with the same benefits package. What's more, with so many changes and cost increases on the horizon, you owe it to yourself and your family to take a close look at your options."

An article cited offers some suggestions on how to handle the changes and avoid huge cost increases.

In a subsequent NY Times article by Lesley Alderman, the journalist writes:

"The time-honored 'evergreen' option — defaulting to your current plan — may simply no longer be an option. Either your employer no longer even offers that plan, or the terms may be so radically different that you may no longer want it. With so much in flux, this may be the year you will need to switch health plans."

For many of us with chronic conditions, Flexible Spending Accounts (FSA's) are a huge benefit, and if this is an option offered that you don't presently take advantage of, and you have diabetes, you might very well consider participating. These so-called FSA's provide you with the ability to pay for any deductible amounts, as well as all of your co-pays for testing supplies, medicines, numerous doctors visits, labwork, etc. and even things like contact lenses, glasses, or dental work -- all using pre-tax dollars, thereby reducing your income tax liability.

Congressional Healthcare Reform Could Kill Tax-Advantaged Flexible Spending Accounts (FSAs)

This year, I expected to use more of my FSA balance with my high-deductible insurance plan that was introduced this year (in June), and I'll naturally order more glasses and contact lenses as I normally do every year. Although I try to budget things as closely as possible, it's never exactly been a scientific procedure determining co-pays with a brand new healthcare plan, as well as costs for everything else. Most employers set caps on the plan amounts employees can contribute since they have to front-load those dollars for all of their employees, but the caps set may be different for every company.

Although I have a high-deductible insurance plan ($2,500), because my employer picks up the cost of anything over $500 (which is an administrative hassle, but at least I don't have to pay for all of it) that means I'll still have some money left over, and I plan to use as much as I possibly can so I don't have to forfeit much.

Because I expect to have enough left over, I'm seriously considering splurging and getting a high-tech (and expensive) lancet device called the Pelikan Sun. Fellow d-blogger Amy Tenderich reviewed the product a while back. That will cost about $200 plus a few lancet disks at about $50/each (I don't think this device enables perpetual re-usage of the same lancet that most ordinary devices do, but then again, I should remember change the lancet more than once per year anyway). I think this will be an easier claim for my FSA given that it is already an FDA approved device, and it fits clearly within the "diabetes supplies" category as defined by the IRS.

Next year, however, assuming Congress finally gets around to passing a healthcare "reform" bill, The Wall Street Journal is reporting that members of the Senate Finance Committee are proposing to cap tax-free FSA contributions at $2,500 per year.

That's well above the amount typically put in the accounts now, according to a Senate Finance staffer. (Presently, there is no statutory cap, although most employers set caps on the plan amounts since they are required to pre-pay the amount for all of their employees enrolled in the plans at the beginning of the year, even though it's deducted from participating employees' paychecks during the course of the year.)

But what that Senate staffer failed to mention is the fact that the Senate bill would also provide no inflation indexing of that cap, so if medical cost inflation continues at roughly 8% per year, the $2,500 turns into just $1,250 in 9 years, which as a number of editorials have rightly noted, virtually kills the Flexible Spending Account program over time.

The editorials also rightly note that this change unfairly punishes people who have chronic diseases -— people who, according to the Robert Wood Johnson Foundation, incur annual out-of-pocket expenses averaging about $4,400. We are talking about people with diabetes, families with autistic children, asthmatics who need to buy expensive nebulizers and inhalers, and cancer patients and others.

Apparently, Max Baucus want to end the practice of allowing people to put money into FSA's, which allow employees to pay for co-pays, deductibles as well as everything from cosmetic dental work to surgery using tax-free dollars (well, technically, they're pre-tax dollars which reduces your taxable income, not tax-free dollars).

Diabetes supplies ranging from glucose tablets, lancet devices, and a host of other things all fit under this broad umbrella definition, and frankly, this program has saved me a lot in tax liability and has helped me to weather the ever-growing cost increases in healthcare costs much easier than I could have without it.

As might be expected, a trade organization called "Save Flexible Spending Plans" which launched a companion Web site, The site is the brainchild of the Employers Council on Flexible Compensation, a group of plan sponsors and third-party administrators that want to preserve and expand tax-favored employer-sponsored benefits, as they stand to loose out if these plans are reduced.

Catch the "Save Flexible Spending Plans'" commercial here:

Critics argue that this organization is nothing more than an organization of people who stand to loose if this piece of legislation passes. That may be so, but the mystery is what the final cost of the Healthcare bill will look like for taxpayers. We may see little, if any tax benefits for those of us whose medical expenses have gone up thanks to ever-higher deductibles and employers who continue to deal with cost increases by using a flexible spending account that apparently, Congress wants to kill.

Anyway, for those of you who are now faced with open enrollment decisions, all of this is some food for thought!!

1 comment:

Unknown said...

Great info as usual, and thanks for the shout-out, Scott!