Obamacare causes higher taxes and smaller FSA amounts

Merry Christmas!

Q.How will health care reform impact my flexible spending account? A.Currently, the cap for contributions to flexible spending accounts is about $4,500 on average nationally, according to Save Flexible Spending Plans, an organization dedicated to protecting flexible spending accounts, also known as FSAs. But this cap is likely to drop to $2,500, as both the House and Senate bills lower the cap to that amount with the aim of helping the government collect more tax revenue. “Unfortunately, the FSA is an unintended consequence of health care reform,” said Jody Dietel, executive director of Save Flexible Spending Plans. “They were identified early on as a source of revenue rather than as sound health care policy.”

Q.If I have particularly high-cost health insurance now or am considered wealthy, how will the legislation impact me? A.You’ll very likely be paying more to help support the coverage of others less fortunate than you. The House bill imposes a 5.4 percent surtax on high-income people (couples with adjusted gross incomes of more than $1 million a year and individuals over $500,000), while the Senate bill would tax high-cost employer-sponsored health plans, known as “Cadillac health plans,” and increase the Medicare payroll tax on individuals with incomes over $200,000 and couples over $250,000. According to this New York Times article, “lawmakers said they could envision a compromise mixing the two approaches.” Q.What happens if I don’t want health insurance? A.You’ll have to pay some kind of a penalty, as both the House and Senate bills both require individuals to buy health insurance. According to this comparison of the bills, the House bill imposes a fine of up to 2.5 percent of a person’s adjusted gross income over certain thresholds, while the Senate plan imposes a fine that starts at $95 a year and grows to $750 in 2016 and beyond. Q.Who will be considered a dependent? A.While the exact age cut-offs will need to be worked out in conference if the Senate bill passes, the age of dependency is likely to rise. The House bill allows children to stay on their parents’ insurance plans through age 26, while the Senate bill allows children to stay on their parents’ insurance plans through age 25.