Flexible Spending Account Providers Fighting to Protect Benefits

Posted July 31, 2009 at 5:29pm

Payflex Systems, an employee benefits company in Omaha, Neb., never saw much use for hiring a federal lobbyist. That is, until Congress started sniffing around Payflex’s business to help defray the costs of health care reform legislation.

“This is all new to us,— Payflex CEO Bob Natt said. The company in recent months has hired three lobbyists, including health care heavyweight Richard Tarplin, a former Health and Human Services official in the Clinton administration.

“We’ve never been involved in lobbying efforts, so we’ve stepped up to the plate,— Natt said.

Payflex and other companies that administer flexible spending accounts, which are used to pay for health care expenses, have reason to worry.

The House health care reform bill includes a ban on using FSA money to buy over-the-counter medications, and the Senate Finance Committee’s version is expected to include a possible $2,000 cap on the amount of money that individuals can put aside in the accounts each year.

FSA programs allow employees to withhold from taxation a certain amount of their annual compensation to be used only for health care expenses that are not covered by health insurance. These often include the costs of eyeglasses, orthodontic services and some types of dental care.

Currently the government places no limit on the plans, but most employers that participate in the programs cap them at $5,000.

The Joint Committee on Taxation has said a $2,000 cap could generate $18 billion over a decade.

A coalition of companies that includes Payflex is ramping up its lobbying, advertising and grass-roots advocacy as Members head home for the August recess, urging Members to leave the FSAs alone. And the companies are fueling lobbying business as well.

Their main message is that capping FSAs would amount to a tax increase on middle-income families who rely on the plans to help manage uncovered health bills.

An offshoot of the trade association Employers Council on Flexible Compensation, the coalition is also reaching out to health care providers, like orthodontists and opticians, whose services are often not covered by medical plans.

Jody Dietel, spokeswoman for the Save Flexible Spending Plans effort and an executive with benefits company WageWorks, said any cap of less than $5,000 a year would make out-of-pocket health costs too burdensome on working families. The average income of a FSA member is about $55,000, she said.

“We’re trying to contact and educate every single Member of Congress,— she said. “We will intensify our efforts when Members are home during the recess.—

Her group helped bring the effort to Michael Rogers, an orthodontist in Augusta, Ga., who serves as secretary-treasurer of the American Association of Orthodontists. “We are not in favor of a cap because so many of our patients are using that for orthodontic care,— said Rogers, noting that 20 percent of his patients rely on FSAs to pay his bills.

To gin up the grass-roots effort, the company Ceridian Benefits Services sent a two-page letter to its customers informing them of the Congressional activity on FSAs. “We urge you to contact members of Congress and ask them to preserve the tax-saving advantages of Health Care FSAs,— said the letter, signed by Ceridian’s Bart Valdez.

Count Dennis Triplett, chairman of the ECFC’s board, as part of the effort.

“Hopefully these Members will be more accessible back home,— said Triplett, CEO of UMB Healthcare Services in Kansas City, Mo. “We are encouraging everyone to call, to write, to visit, to attend barbecues or whatever the local event might be and let their views be known.—

The possible cap of $2,000 would result in people skipping medication or opting not to get medical devices or other items that help them control chronic disease, said Rishabh Mehrotra, CEO of the benefits company SHPS, which is working with the C2 Group for lobbying.

He said that his firm has studied the financial side and the health side, and that when people don’t have access to FSA money, they are more likely to cut corners on managing their illnesses and end up in the emergency room, incurring even bigger expenses for the health care system.

“We’ve been having discussions with Members of Congress and have shared our research,— Mehrotra said. “There’s not enough awareness about this issue. They see this as a pay-for. But this is a real tool that people are using to manage their health and their health care costs, and we want to encourage more of that behavior in reform. We’re passionate about health care reform.—

Other benefits companies that are working with lobbyists on the FSA matter include Evolution Benefits, which has hired the McManus Group. Conexis hired a team from Alston + Bird in June. And Mehlman Vogel Castagnetti is working for the ECFC.

While not part of the benefit companies’ coalition effort, the Consumer Healthcare Products Association and other groups that would be hurt if FSAs could no longer be used for over-the-counter drugs are also involved in lobbying against changes to FSAs.

“We’re not working that closely with them, but we’re certainly aware of what they’re doing, and I think it’s a pretty complementary effort,— said Allen Segal, director of federal affairs for the Consumer Healthcare Products Association, which represents companies that make over-the-counter medications.

Segal’s group supports the idea of the $5,000 cap — something the benefits companies say they can live with — in lieu of banning over-the-counter drugs from the plans. “Our big thing is, we think what they’re proposing to do with OTCs runs counter to what they’re trying to achieve in general with health care reform,— Segal said. “OTCs are a cost-effective alternative.—

Natt of Payflex said that if Democrats have pledged not to raise taxes on the middle class to pay for health reforms, then they should leave the FSAs as they are. “People don’t put money in there willy-nilly,— said Natt, who is also working with lobbyists from the Groom Law Group. “These are for people who have chronic needs that aren’t covered.—