Your Health Savings Accounts and Flexible Spending Accounts Take the Biggest Hit
While 40% of our 50 United States’ Attorneys General continue to press their law suit to have H.R.3590 (better known as ObamaCare) declared unconstitutional under the 9th and 10th amendments, implementation of the massive reform continues to roll out. Beginning January 1, 2011, another 21 provisions will begin to be implemented. While the majority of the 2011 provisions deal with Medicare and Medicaid payments, fraud, drug coverage, benefits and administration, there are a couple of provisions that may have a big impact on employer-provided and individual health insurance coverage.
Changes are scheduled to tax-free health savings accounts and flexible spending accounts that may cost you significantly. Beginning January 1, 2011, you can no longer use your HSA or FSA funds to purchase over-the-counter medicines unless they have been specifically prescribed by a doctor. That means you’ll need your doctor to write a script for your ALL of your OTC antacids, pain relievers, reading glasses, eye-care products and contact solution, skin care products , allergy medications, non-prescription birth control, or any of the other preparations you currently walk into the drug store or supermarket and buy. So, in addition to losing some convenience and freedom, you’ll also have to cough-up the co-pay for a doctor’s visit to get the stack of prescriptions you’re going to need if you want to continue to get a tax advantage for your OTC purchases. You might also want to stock up before the end of the year.
By the way, this is the first of a series of phased hits on flexible spending accounts. Today, there are no limits on what you can contribute (although most employers cap the maximum contribution around $5,000). Beginning in 2013, your maximum FSA will be limited to $2,500 (although it may occasionally be readjusted for inflation).
You will still be able to roll your HSA funds over from year to year. However, on New Year’s Day 2011, if you want to withdraw funds to use for things other than health care, the penalty jumps from 10% to 20%, and as before, you’ll have to pay income tax on that withdrawal.
Politicians may not call these changes to HSAs and FSAs tax increases, but for people struggling to make ends meet in a stagnant economy, they sure walk and talk like that breed of duck!
While you’re pondering how you’ll deal with these changes, you can take heart in knowing that by March 23, 2011, ObamaCare will require full nutritional disclosure on the standard menu items sold at every chain restaurant and vending machine.