Tuesday, February 22, 2011

Legislation Introduced to Repeal Flexible Spending Account Limits

This week, Senator Kay Bailey Hutchison (R-TX) and Congressman Erik Paulsen (R-MN) introduced, in the Senate and House, respectively, the Patients’ Freedom to Choose Act to remove future contribution limits on FSAs as well as include over-the-counter medicines as an allowable medical expense.

On January 1, 2011, a provision in the health care law took effect prohibiting individuals from using funds from either HSAs or FSAs to purchase over-the-counter medication unless they have a prescription from their doctor. In addition, starting in 2013, PPACA institutes a $2,500 federal cap for all FSA contributions. Over 80 percent of all large employers that offer an FSA to their employees include a limit that is over this $2,500 threshold.

Sen. Hutchison’s and Rep. Paulsen’s legislation repeals the arbitrary cap on FSA contributions by striking the $2,500 restriction. It also repeals the provision that requires patients using HSAs or FSAs to have a prescription from their doctor before they purchase over-the-counter medication.

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