Is there any research out there as to what consumers think about
flexible spending accounts?  What are their perceptions of a flexible
spending account?  We know only 18-19% of eligible employees sign up,
but I'm seeking research on consumer's attitudes on these accounts.
What frustrates consumers about these accounts?  We know they don't
like the "use it or lose it rule" but are they bothered enough by the
reimbursement process (paperwork etc) that pushes them not to sign up?

tks

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Clarification of Question by scottcompany-ga on 08 Jun 2005 09:20 PDT

Clarification:  
FSA refers to flexible spending account for health items
this question is specific to health care

There are several factors that cause employees to have negative
perceptions of flexible spending accounts.  The use it or lose it rule
is certainly the largest one, but having to forecast medical expenses
and deal with the reimbursement process are also significant.  A major
issue with the reimbursement process is not only confusion about what
is reimbursable according to IRS regulations, but also the fact that
employers do not have to reimburse for all of the "eligible expenses"
the IRS allows.  This permits each company to have a unique set of
expenses they will reimburse, furthering employee confusion.

A variety of measures have been taken to try to make the accounts more
attractive.  The IRS has expanded the list of eligible expenses to
include nonprescription drugs (however, employers have to allow their
participants to receive reimbursement for them).  The IRS has also
clarified the use of debit cards to withdraw funds from a flexible
spending account, which eliminates the need for sending receipts to
the employer seeking reimbursement.  In addition, unused amounts in
flexible spending accounts can now be spent for a 2 1/2 month period
after the end of the previous year, which gives employees more time to
use them before they are forfeited.

Because more common medical expenses are potentially covered by
flexible spending accounts, employers can make reimbursement much
easier for employees by simply allowing them to access their balances
through debit cards, and employees have more time to spend their
contributions, the accounts should become more attractive to
employees.  Elimination of the use it or lose it rule entirely or the
ability to determine contributions once expenses were incurred would
obviously greatly aid adoption.  Legislation was passed in the House
last year to allow participants to roll over $500 of unused
contributions, but it apparently got stuck in the Senate.

Sincerely,

Wonko

"IRS rulings make medical flexible spending accounts more attractive"
by Sandra Block, USA Today (September 29, 2003)
http://www.usatoday.com/money/perfi/columnist/block/2003-09-29-ym_x.htm

"Get a grip on your flexible health spending account before it's too
late" by Sandra Block, USA Today (July 13, 2004)
http://www.usatoday.com/money/perfi/columnist/block/2004-07-13-ym_x.htm

"Flexible-Spending Accounts: "Use-It-or-Lose-It" Extended" By Darren
McKewen, CareerJournal.com (June 1, 2005)
http://www.careerjournal.com/hrcenter/briefs/20050601-bna.html

"Health Savings Accounts Undermine Push to Allow Flexible Spending
Account Rollovers" by Eilene Zimmerman, Crain Communications Inc.
(January 27, 2005) http://www.workforce.com/section/00/article/23/93/57.html

Search Terms: "flexible spending account" survey

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Request for Answer Clarification by scottcompany-ga on 08 Jun 2005 12:40 PDT

Thank you for this.  In fact I know and agree with all these comments,
but I was looking for research, sources etc... some published
facts/figures (beyond newspaper columns).  Any help with (serious)
research sources?  tks

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Clarification of Answer by wonko-ga on 08 Jun 2005 13:59 PDT

Finding quantitative data is turning out to be quite difficult.  The
following source is the best one I have found with quantitative
figures.  The second one states that it derives its information from
studies, but does not provide quantitative information.  The third is
another source confirming the obstacles I initially reported from a
more authoritative source.

I hope these help.

Sincerely,

Wonko

"Families Underutilizing Flexible Spending Accounts (FSAs) 

Although families with dependent children may use frequent medical
care for well-child visits and recurrent, acute illnesses such as ear
infections,4 only one-third are enrolled in the health care FSAs
available to them. More than half (52%) said that they did not
participate in a tax-favored FSA because of the risk of losing unspent
savings. One in four (24%) indicate they have eligible expenses, but
that saving receipts and getting reimbursed require too much effort."

"Fidelity Report Shows American Workers Are Changing Behavior In
Response To Rising Health Care Costs And Coverage Cutbacks" Fidelity
Investments (September 24, 2003)
http://content.members.fidelity.com/Inside_Fidelity/fullStory/1,,3140,00.html

"The first step in growing FSA participation is to understand why
people do not participate, then address the problem. Studies have
indicated that there are four primary reasons why employees elect not
to participate:

Concerned about the "use it or lose it" rule that does not allow
left-over funds to be rolled over at the end of the year.
Don't think they have enough out-of-pocket expenses to justify
contributing to an FSA plan.
Not easy to use - have to submit receipts each time a reimbursement is requested.
Do not know enough about FSA plans or are unaware the employer offers it."

"Flexible Spending Accounts: How can you improve employee
participation?" Ceridian Connection (October 2004)
http://www.ceridian.com/myceridian/connection/article/archive/0,3263,12056-56134,00.html

"Time to Get Flexible With Flexible Spending Accounts" Financial
Planning Association (December 2003)
http://www.toalfinancial.com/fsa.php

Just a note:
I have a High Deductible Health Plan that comes with a spending
account.  The insurance company puts in $100 per month ($200 if it's a
family plan) to be used for any health expenses.  The policy comes
with preventative stuff covered and also catastrophic coverage... and
fortunately the money doesn't disapear at the end of the year, it
builds up indefinately.
It's an amazing plan for a relatively healthy person, but as Wonko
stated the claims process is a complete bear.  I'm still working on
getting money out from a doctors bill I had 4 months ago.  I haven't
put alot of effort into it yet, but honestly should I have to since
the money is mine anyways?

Thanks and I agree
In fact part of the project is to create a system that solves this
reimbursement problem!
tks

I was recently informed by my health care provider that I can sign up
for an automatic payment system where my doctors (whoever they may be)
send the health insurance people my bills and the bills are paid
directly out of my account without any work on my part.  Hopefully it
will work out that smoothly, but I'll find that out with my next
medical bill.

I like this system, but I'd like it more if the bills would show up
online and I'd get an email notification telling me about them, then I
could simply click on "Yes, pay this bill" or "No, don't pay this
bill".