Monday, November 12, 2012

Health Activist Soapbox: Health Care Reform Needs Reform! #NHBPM

I'm of the opinion that we rarely get things right on the first attempt.  I think it isn't until we give it a go for several rounds that we finally get closer to what we want, need or envision.

So when I think  about the Patient Protection and Affordable Care Act (PPACA), a.k.a. Obamacare, what pops into my mind is, "First draft, needs a revision."

I already know I don't like the changes the PPACA makes to:

  • medical flexible spending accounts
  • the medical expense deduction on Federal income taxes
  • the tax on the manufactures and importers of medical devices

You might think I'm just complaining, but mark my words.  I predict that once this massive 906 page law is fully in effect, we are all going to encounter an unpleasant surprise or two when it comes to our health care.

As far as I am concerned, this isn't a done deal.  Sure, lots of people are celebrating this as a historic win, but I see this as a work-in-progress and a new advocacy issue, especially since I've been told that the needs of those of us with chronic illness weren't really taken into consideration during the writing of this new law.  With what little I know, I can already see that the PPACA needs changes, revisions and rewrites, and sooner than later.

There is a lot of ground to cover here, but right now I just want to talk about the changes to medical FSAs.  So here is my opinion on the changes that take effect January 1, 2013 and why I think you need to be concerned too if you are covered by an employer-sponsored cafeteria benefit plan.

Medical Flexible Spending Accounts (FSA)

What is an FSA? A benefit program where before-tax money is deducted from an employee's paycheck and placed into an account.  The account is used by the employee and their family to pay out-of-pocket medical expenses.

Why haven't I heard of FSAs before?  According to the Employers Council on Flexible Compensation, only 25% of eligible working Americans take advantage of this benefit.

How does the PPACA change FSAs?  Before, the employee could decide how much to put into their FSA account every year.  Beginning January 1, 2013, contributions to medical FSAs will be limited to $2,500 for an employee and their family.

Why is this a problem? This change will hurt those who have a lot of out-of-pocket medical expenses, like those living with chronic illness, autism or children with special needs.

Why should I care? Out-of-pocket expenses included things like deductibles, co-insurance and co-pays. If you have health insurance, you will be paying these fees as part of cost-sharing provisions in the PPACA.

What you might not know is that the PPACA puts the ceiling on health plan out-of-pocket expenses to $6,000 for individuals and $12,000 for families starting in 2014.  These limits were set based on rates associated with high deductible health plans and, of course, can be raised in subsequent years due to inflation.

Now I just looked and the current deductibles for our employer-sponsored health insurance plan are no where near this high.  Which has got me worried that my husband's employer could decide to raise deductibles to meet their growing costs under the PPACA.  Sure enough, we are in open enrollment right now and our deductible has gone up, not a lot, but still every little bit means less money for other expenses.

O.K., back to why I think you should care...

In previous years, you could put $12,000 into your FSA and you'd be covered.  By doing so, you saved yourself anywhere between 25 to 40 cents on every dollar spent since you were using pre-tax money.  Beginning in 2013, the worse case scenario is you paying out $9,500 of your hard-earned after-tax dollars to pay for health care expenses.  By my calculations, in this scenario you'll be paying an extra $2, 375 to $3,800 in taxes just by paying your medical bills.

What do FSA experts say about this? My husband's employer uses a company called WageWorks to manage its FSA program.  Jody Dietel, the compliance officer for WageWorks, said in a recent interview that, "...it’s not really a health care friendly policy—it was a revenue grab.

In other words, this is one way working Americans and their families are funding the PPACA.

Are We Going to Pay More for Healthcare?

I guess that is the $25,000 question, isn't it?  Even the respected Kaiser Family Foundation says,
No one knows for sure. Even supporters of the law acknowledge its steps to control health costs, such as incentives to coordinate care better, may take a while to show significant savings. Opponents say the law’s additional coverage requirements will make health insurance more expensive for individuals and for the government.
Like I said, I think we're all in for some health care surprises.

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Jamie said...

I have to agree with you. My husband's insurance is in open enrollment right now, and our premiums definitely went up. It may not sound like a whole lot, but the cost is taken out over 26 pay periods throughout the year - which adds up to a big difference.

I have to say that I'm not too thrilled with the changes that come from Obamacare. I know that I don't actually know a whole lot about it, but I'm not convinced that anyone truly knows and understands everything that's in it.

I'm so very grateful that my husband's insurance / benefits are so good. I'm sure I might have a different opinion about the act, if I didn't have such good insurance. But, I think there will definitely be surprises for ALL.

Definitely a work in progress... needs revision

Duncan Cross said...


I agree with the general idea that the PPACA needs revision, but your concern with FSAs seems like a minor quibble. I'm a working American and, like most working Americans, I can't get an FSA; the money you say I 'will' pay is money I am already paying in taxes.
Good for you that you are fortunate enough to have one, but it seems to me that by the point you're worried about tax savings from an FSA, your health care coverage is not in peril. I don't think the fact that your taxes will be a little bit closer to what the rest of us pay is a problem that needs solving. I am sure you could put that money to good use, but it's just not that important to me compared to the many, many families who will be able to afford insurance for the first time. You know I am fond of you, but I am not seeing the problem.


Unknown said...

Hi Duncan,

Yes, I think it is a problem that some people don't have medical insurance.

But once they have insurance, will they be able to afford to use it? Especially if that coverage has high deductibles, co-pays and co-insurance?

The issue of out-of-pocket expenses is a major concern for me and my family. I use my health care insurance a lot: I have 5 doctors appointments this month alone, plus a trip to the lab. The doctor co-pays alone are $175 this month.

My husband works, but I am on disability. Our budget is really tight and even with health insurance, we sometimes have to make hard choices about what gets paid and what doesn't in the face of high out-of-pocket medical bills.

According to this article at CNN, http://bit.ly/SUozJ8, one major medical illness is often all it takes for people to wind up in bankruptcy...even IF they have medical insurance. They reported, "If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy..."

I'm sorry you don't have access to an FSA--it really is a wonderful benefit. FSA really helps make paying all my out-of-pocket expenses more affordable.

I also think the FSA can be a useful model in the PPACA. It certainly allows individuals and families to decide how they want to spend their healthcare dollars. I don't think letting people decide for themselves is a bad thing and I would definitely prefer it over any subsidy I might (or might not) be eligible for under PPACA.

But I get it. Some legislators in Congress see pre-tax money as a loss of revenue, so they wanted to get that money back.

Some also thought limiting FSAs would help cut back on health care use, i.e. less money to spend, fewer medical expenses. Unfortunately that logic doesn't apply to my situation.

But perhaps there is something else in the PPACA that can help those with chronic illness with our high out-of-pocket expenses? Or help anyone who has a plan with high deductibles, co-pays or co-insurance to afford to use their new health care insurance?