Restoring Assistance for Families and Seniors' Health Expenses: Congressman Dave Reichert's Proposal to Repeal Unfavorable Provisions of the Health Care Overhaul Law

Strategic Insights -

Congressman Dave Reichart (WA-08) has introduced the Restoring Assistance for Families and Seniors' Health Expenses Act (H.R. 450), a legislation aimed at repealing provisions of the health care overhaul law that have placed additional tax burdens and restrictions on individuals, families, and small businesses. The proposal seeks to repeal the cap on the maximum annual contribution to Flexible Savings Accounts (FSAs), restore the 7.5 percent income threshold to deduct out-of-pocket medical expenses, and allow holders of FSAs and Health Savings Accounts (HSAs) to use money from their accounts to purchase over-the-counter (OTC) medicines.

Key Takeaways:

  • The Restoring Assistance for Families and Seniors' Health Expenses Act (H.R. 450) would repeal the cap on the maximum annual contribution to Flexible Savings Accounts (FSAs), restoring it to its original unlimited status.
  • Approximately 7 million Americans would benefit from the repeal of the cap, as they put more than $2,500 into their FSAs in 2011.
  • The median income of an FSA holder in 2008 was just $55,000, demonstrating that FSAs are not solely beneficial to high-income individuals.
  • The proposal would also repeal the ban on using FSA or HSA accounts for the purchase of over-the-counter (OTC) medicines, allowing individuals to take advantage of more affordable options.
  • Some OTC medicines can now be purchased over the counter for half the price of their prescription versions, providing a significant cost savings for individuals.
  • The legislation would restore the medical expenses deduction to 7.5 percent of taxable income, benefiting individuals and small businesses.
  • According to the Joint Committee on Taxation, more than 95 percent of the tax increase imposed by the change from 7.5 to 10 percent would fall on filers earning under $200,000.

Statistics:

  • 35 million Americans use Flexible Savings Accounts (FSAs) to manage their healthcare expenses.
  • The health care overhaul law placed a new cap on the maximum annual contribution to FSAs, limiting it to $2,500 starting in 2011.
  • Approximately 7 million Americans put more than $2,500 into their FSAs, taking advantage of the benefits provided by FSA accounts.
  • The median income of an FSA holder in 2008 was just $55,000, demonstrating the accessibility of FSA accounts.
  • More than 95 percent of the tax increase imposed by the change from 7.5 to 10 percent would fall on filers earning under $200,000.

Sources:

  • The Restoring Assistance for Families and Seniors' Health Expenses Act (H.R. 450)
  • Congressman Dave Reichart (WA-08)
  • National Federation of Independent Business (NFIB)
  • Employers Council on Flexible Compensation
  • Joint Committee on Taxation