Paper Cuts: The Trouble with Health Care Flexible Spending Accounts
You go to the store to buy a loaf of bread. You stop on the way home and fill up with gas. You run into the coffee shop next door. You do all this with your cash card, and you make purchases like these all month long, knowing that you have enough money in the bank.
But then you receive an ominous note in your inbox before you head to work. It says that one of your purchases – it doesn’t say which one – may have violated the bank’s rules.
This seems scary.
So you go to the bank’s website to see which purchase broke what rules and why. You are met with a list of dates and amounts – nothing about what was purchased or where. So you start to dig through what receipts you still have in your wallet before you find that you’ve wasted an hour and you’re late for work.
A few days later, you receive another ominous note. The bank is threatening to block you from using your cash card – using your own money that you earned and put into the bank – unless you prove that the bill for $20.17 that was made earlier in the month at some unknown locale is legitimate. Was it the gas? Was it the bread? A really expensive mocha? If you don’t find out quickly, thousands of dollars in your bank account will be frozen. What’s worse, if you aren’t able to spend those thousands before the end of the year, the money will disappear.
This scenario is real.
It is the time-wasting, anxiety-inducing, blood-pressure-raising hassle people are greeted with every few weeks by companies that manage flexible spending arrangements, including the company that manages the inflow and outflow of funds from my account, ASIFlex in Missouri. You remember flexible spending arrangements? They were the private-public solution meant to solve many of the problems people had covering their health care bills.
Health insurance premiums keep going up. Deductibles keep getting bigger. But employees are told that these accounts will save them from bankruptcy by allowing them to stick a portion of their pay into an account before taxes are taken out of their paycheck. You can only spend that money on health care expenses – like visits to the doctor and dentist, prescription drugs, and visits to the hospital.
So one would think that, any time someone made a purchase using flexible spending funds at a doctor’s office, clinic, hospital or pharmacy, that the purchase would be seen as legitimate. Not so. Nearly every health care bill I have paid using health savings funds requires follow-up documentation.
If you don’t spend all the money by the end of the year, it goes to the federal government. You can only change the amount of money you put into the account once a year, making the experience a little maddening. If you set aside $100 out of every twice-a-month paycheck for health care expenses, you will have nearly $2,000 in the account by September. If you have only spent $500 of that money, with the end of the year approaching, it’s crazy-making to continue to watch more money go into an account every two weeks that is ultimately going to be taken away.
The system is set up to generate more paperwork than necessary on the part of everyone involved – the patient, the government, and the private company managing the accounts. Is there a way to make any of this any easier? I’ll talk about that in my next post.
Have your own ideas about flexible spending arrangements? Send me a note at askantidote [at] gmail [dot] com or via Twitter @wheisel.