WASHINGTON — Those tax-free spending accounts you and your co-workers use to help pay for dental work, insurance copayments or over-the-counter drugs face a hit under the health overhaul bills in Congress — unless a coalition that includes a powerful union, insurers and others can stop it.
Bills in the House and Senate would cap at $2,500 an employee's allowable annual contribution to a health care flexible spending account.
There is no federal cap on contributions now, though companies that offer the accounts — more than 80 percent of companies employing 500 or more workers do — typically impose their own limits, usually around $5,000.
Workers can use the accounts to save pretax income, which then can be used to reimburse a range of medical expenses, including dental and vision costs, prescription and over-the-counter medications and copays and deductibles — again without being taxed.
Capping contributions to the accounts would raise more than $13 billion over 10 years to help pay for Democratic health care legislation because it would limit the amount of employees' income that is exempt from taxation.
But an unlikely bedfellows coalition that is characteristic of this health care debate — where common interests can unite groups that might typically be at odds — is mobilizing to try to stop the change.
A limited print ad campaign declaring "Flexible spending accounts work!" appeared this past week in Capitol Hill publications. It's paid for by a group called Save Flexible Spending Plans that is backed by insurers, companies that administer consumer spending accounts and other businesses with a financial stake in the outcome. The United Food and Commercial Workers International Union endorsed the campaign and its logo appears on the ads.
"Our concern is that a cap of $2,500 is a definite tax on the middle class, particularly those with chronic illnesses," said Jody Dietel, executive director of Save Flexible Spending Plans and chief compliance officer at WageWorks, Inc. of San Mateo, Calif.
Advocates say the typical flexible spending account user makes $55,000 annually.
Although some lawmakers are sympathetic, the opposition appears unlikely to succeed in getting the flexible spending account cap out of Congress's health care bill. Unlike the initial Senate proposal, though, House members want to allow the cap to be adjusted so it would rise along with inflation.