There's more data available that suggests that, unless the so-called Cadillac tax is repealed, flexible spending accounts may be targeted for extinction.
A survey of hospital management personnel found many will do away with the flexible spending account plan option if the Patient Protection and Affordable Care Act tax on "rich" plans is not repealed or substantially overhauled.
Now the Kaiser Family Foundation has weighed in on the issue with projections of the number of employer sponsored plans that would trigger the tax if they remain unchanged by 2018, when the tax kicks in.
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Kaiser said 16 percent of respondents without an FSA component indicated their plans as currently structured would exceed the $10,200 individual coverage threshold in 2018. However, 26 percent of those that include an FSA would trigger it.
And the percentage leaps to 30 percent of FSA plans in 2023 (vs. 22 percent without) and 42 percent by 2028 (vs. 36 percent without).
When viewed by large firms vs. small firms, the large company plans with FSA options are especially vulnerable to the tax: 46 percent would trigger it in 2018, 56 percent in 2023 and 68 percent in 2028. The highest percentage of small company plans to trigger the tax would be 41 percent in 2028, Kaiser said.
The results "should not be surprising since the maximum FSA contribution levels (estimated to be $2,700 in 2018, $3,100 in 2023 and $3,600 in 2028) are quite large and generally are additive to other benefit costs for employees that elect to contributions," Kaiser said.
The FSA will likely be a major source of plan cutbacks, Kaiser said.
"One current benefit that may be at particular risk is the option to contribute to an FSA because, as currently structured, it allows employees to add up to several thousand dollars to their benefit costs. These plans are separate from the core health insurance options provided by employers, so limiting or eliminating them provides a way for employers to lower costs without affecting the plans that most employees rely upon and value the most."
But there are other logical places where cost reductions to avoid the tax can be made, Kaiser said.
"Employers also may consider reducing other ancillary health benefit options (e.g., critical disease or hospital indemnity plans) offered on a pre-tax basis if the cost of the core health insurance plans approach the HCPT thresholds."
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
