The Federal Government’s role as a safety net for the vulnerable has been growing steadily since the passage of the New Deal in the wake of the Great Depression, when President Roosevelt introduced such novel concepts as Social Security. Follow-up legislation in the 1960s established Medicare, which continues to help senior citizens remain independent as culture moves further away from the multi-generational household. Responsibly funded, these programs represent the best possible government involvement in personal finances. They grant breathing room to those who have paid into the system and can no longer work, be it from old age or an unforeseen economic downturn.
This line of thinking takes its next logical step in the adoption of the Affordable Care Act (ACA), the end result of President Obama’s attempts to introduce European-style health care coverage to an American population. Whether the legislation on the whole is a step too far remains controversial, but here we will focus on one particular community that has quite a bit at stake in the healthcare conversation. What we find when we dig into the ACA is a mixed bag for what is perhaps the most vulnerable population of all: families with children who have mental and developmental disabilities.
The ACA certainly brings some positive changes for those with disabilities. For instance, these conditions children are born with can no longer be cited as reason to deny coverage — this could be seen as a logical extension of the 2008 Genetic Information Nondiscrimination Act signed in the twilight years of the Bush administration — which makes it easier for families to find private insurance. And, of course, these children can be kept on their parents’ plans until they reach age 26. While the merits of this particular provision continue to be debated when it comes to its effects on the general public, in the realm of developmental disabilities, it is a godsend. Anyone with a special needs family member can tell you how legally complicated everything gets once that child turns 18.
Hidden within the massive tome that is the ACA, however, is a provision that can actually make things more difficult for families with disabled children, particularly those in the middle class: a newly-introduced cap on what are called “Flexible Spending Accounts,” or FSAs. These accounts are a place for workers to put their money, before taxes are taken out, that can be used for medical expenses.
This is a great way to handle any regularly repeating medical expenses that aren’t covered by insurance. For example, if you use up your coverage to finance new contact lenses, you could put money into one of these accounts to finance a new pair of glasses that you would otherwise have to pay for out-of-pocket. Anything covered by the Internal Revenue Service’s (IRS) list of accepted medical expenses would make the cut.
These accounts, which could once hold any amount of money consented to by your employer, now have a federally-imposed cap of $2500 annually. For most people this might not be a problem, but it adversely affects those who need that money the most. For those using these accounts to finance eyeglasses or keep stocked up on bandages, this limit is inconsequential. The amount they’ll put in their account over the course of a year is nowhere near that high. Those who incur higher annual expenses suddenly find themselves needing to cover costs with taxed income. For a family struggling to send their child to a specialized school for children with special needs — which consistently cost tens of thousands of dollars per year — this is an enormous blow.
The changes to FSAs were ostensibly to prevent mass stockpiling of tax-free income, and indeed the Federal Government stands to gain quite the pretty penny from the newly taxed cash (to the tune of billions of dollars, according to Grace-Marie Turner writing for Forbes) from the reform. But this is money that could only be used for medical purposes, so FSAs aren’t a viable option to avoid taxation in general, making this cap ineffectual unless the government is worrying about billionaires buying too many medical supplies.
Is there a secret billionaire economy using bandages as currency that I, as a card-carrying member of the middle class, am not aware of? Because unless there is, this particular regulation seems to disproportionately impact those who most desperately need it, for the sake of creating more taxable income — a serious betrayal of the New Deal idealism supposedly fueling the ACA.