Medical expense accounts could be limited to $2,500

In pending legislation, employee contributions as soon as 2011 could be limited to $2,500 to flexible spending accounts (FSAs), which employees can use to pay deductibles, co-pays, dental care and more over a 15-month period. Employers currently set their own limits, generally $3,000 to $5,000.

Meanwhile, some legislators have called for annual contribution limits to health savings accounts (HSAs), which workers can use, teamed with high-deductible insurance plans, to sock away money for current and future medical expenses — sort of like a medical individual retirement account.

Next year, the government will allow individuals to contribute $3,050 to their HSAs; $4,050 for those 55 and older; and families can contribute up to $6,150. But a Senate proposal would limit the allowable contributions to the amount of the account holder’s deductible, or roughly $1,150 and $2,300 respectively for individual and family plans.

Contributions to FSAs and HSAs are made with pre-tax dollars so workers, depending on their tax brackets, can save up to around 30 percent on the money they set aside.

Employers save 7.65 percent in Social Security and other payroll taxes. Some legislators want to limit those tax savings to help pay for health care reform.

"If your kid needs braces in the next year or two, you may want to expedite that,” said Joe Jackson, CEO of WageWorks Inc., a San Mateo, Calif. company that administers flex accounts. He’s also chairman of the coalition Save My Tax Plan opposing the FSA caps. "If passed, the caps are a pretty significant tax Americans are going to incur,” he said.

Proposed legislation prohibits using flex contributions to buy over-the-counter drugs. For example, a Senate bill requires consumers to get a prescription from their doctors to buy the allergy drug Claritin.

"It doesn’t make any sense at all in controlling health care costs to make people incur a doctor’s visit and copay to get a prescription they’ll then take to Walmart,” he said.

Research shows the average annual flex contribution is $1,400, Jackson said. "But those who are putting in the maximum amounts are the sickest or really need the help the most,” he said.

Such is the case with Sabrena Goley of Edmond and Sammye Cravens of Oklahoma City, whose families each contribute $5,000 to FSAs.

"It (the cap) would definitely hurt us,” Goley, 36, said. A stay-at-home mom with three children ages 4 to 8, Goley suffers from kidney stones and has had three surgeries in 18 months. Her husband and Dell employee Chad Goley contributes to the flex account, which their family last year "blew through by the fall” for dental care and pre-orthodontic work alone, Sabrena Goley said.

Chief operating and financial officer for Public Strategies Inc., Cravens, 51, uses the account for eyeglasses for herself and two other family members.

"I have good taste in glasses, so I easily can drop $600 bucks on a pair,” she said. Diagnosed with lymphoma in June, Cravens since has turned to the account to pay other unreimbursed expenses.

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