Flexible Spending Accounts And Will They Work For Health Care Costs

Many politicians and activists have offered so many possible solutions to help reduce the rising number of Americans without health insurance. There are roughly about 43 million people, or one out of every seven. Unfortunately, their proposals are just more of the same, either only offering a patchwork approach that would make only minor adjustments to the current policy, or relying on the existing, fractured health care system to promise to change. Whatever way you want to look at it, they leave the truth untouched that we don't have control and choice in our health care system. The insured are at the mercy of huge corporations that have a need to make money, and lots of it.

These days, many Americans cannot even be treated for major illnesses or get check-ups because the cost is so high. There are generally three forms of health care are available at the cost of the individual, employer-sponsored insurance, individual health insurance, and public health insurance. In all of them the individuals have little to no choice in deciding and controlling the care and services they receive, want, and/or need. Today's employers offer less choice of health-care plans to their employees, while requiring employees to manage a larger share of the costs. They cannot afford to offer lesser expensive plans at a better rate because of the rise in health care costs and premiums. In the small-business community, employers with less than 20 employees are reconsidering whether they should even offer health care to their workers at all. By law they are not required to, and it will save them money, but also make them less desirable to work for. It seems to be a catch 22.

Then there are the public assistance programs that are government controlled, such as Medicaid and Medicare, that are facing many problems as well. Most states continue to struggle with insane Medicaid costs and the rising number of people on the program. Besides putting stress on other state functions, such as education and transportation, it erodes access and quality of care for the dependent populations. The House of Representatives recently took the aforementioned piecemeal route. The most promising of the initiatives it approved would change Flexible Spending Accounts (FSAs). It would allow individuals to carry over up to $500 in their FSAs each year. These accounts, offered through an employer, let employees put pre-tax dollars into accounts that can be tapped for medical expenses not covered by insurance. This would enable many Americans to pay for some of their health care bills and out of pocket expenses.

The huge loophole in this plan as of now is any funds left over at the end of the year are forfeited to the employer. This requirement wrongly implies that these funds are not the employee's. This gives individuals no incentive to save for future health-care expenses. The only actual policyholder's who benefit are individual plan carriers. The employers should be forced to give the employee at least the majority of the benefit. Ideally, employees should be able to carry over all unused funds and/or be allowed to withdraw and pay taxes on them. What is really needed is a more aggressive and comprehensive approach to reform. One that offers a fresh perspective that would revolutionize the health-care system. A system based on personal choice and freedom. One that allows all people to be covered no matter what income level they are at.

There are two changes that are needed to take place to jump-start a health care revolution:

1. Fix the tax treatment of health care. Right now the tax code provides unlimited tax relief for the purchase of health insurance only through the workplace. So, lower-wage workers, those in small firms, get less tax relief than high-wage workers. If a person chooses to buy an individual health plan, he or she must do so with after-tax dollars, which often makes the cost of a plan impossible to meet.

2. Design a consumer-friendly marketplace. In order for individuals to become more involved consumers of health care, there needs to be a marketplace where individuals are able to select from a wide variety of plans that best meet their individual needs. By allowing individuals to pick and choose the plans of their choice, the plans will become responsible to the individual for quality, value and satisfaction. Unfortunately, some states have over-regulated their markets, making coverage less accessible and less affordable. So the first step for policy-makers should be to encourage states to fix their markets to better serve consumers.