Strong Challenge By FSAs Brings Response From Administrations Supporting HSAs

The Treasury Department is doing everything it can to help grow HSAs. Its latest public support came in an announcement by Treasury Secretary Snow that there will be little or no lightening of the rules concerning Flexible Spending Accounts.

These offerings are often compared with HSAs for appropriateness and until last year were the fastest growing form of healthcare options offered by companies.

But in a letter to Congress, the administration categorically rejected the elimination of the “use-it-or-lose-it” provisions of FSAs.

Not surprisingly, this has caused dismay among supporters of FSAs.

President Bush’s team simply doesn’t want anything to get in the way of HSAs gaining popularity.

Support For HSAs Very Strong

In recent meetings with the editor’s of Healthcare & You, administration officials indicated they were strongly behind initiatives that improve the viability of HSAs but were unsure how much they would support easing rules for FSAs.

Hill sources say this is the end of the beginning, giving key Hill committees a stronger impetus to write their own changes without Treasury approval. The prime reason for trying to get Treasury to do it—avoiding a budget impact—is not likely to stop the movement by House and Senate committee leaders to create a level playing field across all products including HSAs, HRAs and FSAs.

"The HSA purists in the White House just don't get it that FSAs are a stepping stone to HSAs," one top-level FSA backer told Consumer Directed Market Report for its January 7 issue. "The idea that FSAs with a rollover are going to slow the growth in HSAs is wrong. It will accelerate the mentality of consumer-driven health accounts, and thus boost HSAs."

The letter, sent two days before Christmas in an obvious bid not to be noticed, replies to an August 23 letter from Senate Finance Chairman Grassley asking why Treasury is still tilting the market against FSAs in order to promote HSAs.

Admission From Treasury

Treasury also says the real reason is it does not want private markets to encourage FSAs by adding a rollover. "Treasury economists have estimated there may be a reduction of up to 10% of the number of Health Savings Accounts established if the use-it-or-lose-it rule is eliminated." 

Treasury officials were slow to report where they came up with the 10% figure or what data supports such a conclusion given that HSAs have almost no market share, but it is true that FSAs grew much faster than HSAs during 2004—even without a rollover.  

The Treasury letter also frets that FSAs do not require HDHPs, which it describes for the first time as "an important policy goal which, combined with the financial incentives of the HSA, will help reduce overall health care spending. There is no such requirement for a high-deductible health plan for those who have an FSA."