Deep Dive Into FSA Behavior Finds Knowledge Gaps That May Reduce Effectiveness

Deep dive into FSA behavior finds knowledge gaps that may reduce  effectiveness | BenefitsPRO

Source: BenefitsPRO, by Alan Goforth

Flexible spending accounts can be a useful way for workers to stretch health-care spending dollars further than they otherwise could. However, little is known about how workers use — or don’t use — FSAs.

In response, the Employee Benefit Research Institute established the FSA Database to shine a light on this under-researched employee benefit. Analysis of this database revealed several things:

Contributions. In 2020, workers contributed an average of $1,265 to their FSAs. Only 7.7 percent of accountholders had the benefit of also receiving an employer contribution. Among those who did, the average employer contribution was $299.

Only 3.6 percent of workers contributed the statutory maximum, which was $2,750 for 2020. Inertia may be a powerful force in setting contribution amounts, because 10.5 percent of workers contributed the statutory maximum for 2019 ($2,700).

Distributions. The vast majority of accountholders took a distribution in 2020. Fully 89 percent did, similar to the share of accountholders taking a distribution in 2019. Of those who took a distribution, the average amount withdrawn was $1,287, nearly identical to the average of $1,279 observed in 2019.

That distributions are closely tied to contributions is not surprising. There is a strong incentive for FSA accountholders to spend the entirety of their balances. Unlike with health savings accounts, there is a limit to how much accountholders can roll over each year — if they can at all — and so accountholders generally cannot withdraw significantly more than they contribute.

Limited-purpose FSAs. Workers enrolled in an HSA are ineligible to contribute to regular health-care FSAs, but they can enroll in limited-purpose FSAs to save specifically for vision and dental expenses. Because these accounts specifically are intended for defraying dental and vision expenses, accountholders tend to use them differently than standard health- care FSAs.

Notably, the average contribution was significantly smaller than the average contribution to a standard health-care FSA — $859, compared with $1,259. This may reflect the more limited scope of qualified medical expenditures that are eligible for reimbursement compared with a regular health-care FSA.

Three different FSA types. “Use-it-or-lose-it” FSAs are self-explanatory; accountholders forfeit any money remaining at the end of the plan year to their employer. FSAs with a rollover feature, on the other hand, allow the accountholder to roll over funds to the next year, up to a statutorily defined amount.

“Grace-period” FSAs allow workers to take distributions up to two and a half months after the end of the plan year. All three types of FSAs had similar average contribution and distributions. Only about $150 separated the average contribution of a “use-it-or-lose-it” FSA and the average contribution of a rollover FSA.

Similarly, the three FSA types saw similar average distributions; about $120 separated the smallest average distribution, seen in “use-it-or-lose-it” FSAs, from the largest average distribution, seen in FSAs with a grace period.

Age and FSA attributes. FSA contributions and distributions both increase with age. Older accountholders are more likely to incur health-care expenditures than their younger counterparts and, because of higher salaries on average, may be better positioned to divert more discretionary dollars to FSAs as well.

Younger accountholders contributed relatively little to their FSAs in 2020, contributing an average of $499. Generally, as age increased, so did average contribution, with one notable exception: The 45 to 54 age group contributed the most, diverting on average of $1,430 to their FSA. The oldest workers in EBRI’s FSA Database contributed the second-highest amount, chipping in an average of $1,427.

“Developing a better understanding of accountholder behavior is critical in fostering optimal usage of FSAs and ultimately can improve workers’ financial well-being,” the report concluded.

“While it is encouraging that older workers stretched their health-care dollars further with higher average contributions and more frequent distributions, younger workers had relatively small contributions, and little more than half took a distribution from their FSA. This is perhaps indicative of a knowledge gap and may hinder a worker’s financial wellbeing.”

Study Looks At the Effectiveness of Health Policies


The Health Care Cost Institute (HCCI) released six policy briefs that look at how national and state policies affect health care costs and utilization. Researchers looked at commercial claims data for more than 50 million insured Americans. The following are Key findings:

  1. Provider consolidation drives up spending on cancer treatment: The consolidation of outpatient practices drove significant increases in cancer treatment spending. Hospital outpatient departments and their affiliated clinics were able to charge insurers additional facility fees. Consolidation also increased the use of more expensive medicines and other outpatient care components.
  2. Unrestricted access to physical therapy reduces opioid use and lowers costs: Seeing a physical therapist as the first point-of-care for lower back pain reduces potentially costly services later on, including emergency department visits and use of prescription opioids. Patients who sought physical therapy first for lower back pain had significantly lower costs, including out-of-pocket costs, for physician, outpatient, hospital, and pharmacy care compared to patients who saw another type of provider.
  1. Nurse practitioners push down the price of primary care: Prices for primary care services fell 1% to 4% in states that allowed nurse practitioners to treat patients without a supervising physician. However, spending on health care increased. Higher total health care costs may be a result of increased volume in services, which may stem from increased access to care.
  2. Designing insurance benefits to incentivize patients to choose low-priced providers for colonoscopies can lead to savings of 8.5% per procedure: Medical spending would decrease by approximately $95 million per year if just three health insurers-Aetna, Humana, and UnitedHealthcare, adopted a reference-based payment program for colonoscopies. These estimates were modeled on the health care savings of the California Public Employees’ Retirement System (CalPERS).
  3. Reimbursement for telehealth services is nearly 40% lower than non-telehealth care: Telehealth claims submitted by primary-care providers have increased from 1,246 claims in 2009 to 2,558 in 2013. But they continued to be reimbursed at lower rates. While many states permit reimbursements for telehealth services, only seven states have passed laws that mandate reimbursement parity between telehealth and non-telehealth care.
  4. Mental Health Parity law has a limited effect on access to mental health services: The Mental Health Parity and Addiction Equity Act (MHPAEA) has had little to no effect on access and use of mental health services for patients with depression, bipolar, or schizophrenia.

Doctors Give ACA Improved Ratings

The number of doctors giving the ACA an F decreased from 30% in 2013, to 22% in 2014, according to a survey by The Medicus Firm. However, only 9% give the ACA the highest grade — up from 6.3% last year.  “Unfortunately, the grades, on the whole, are not very positive, so it’s good that there is some improvement in doctors’ perceptions of the effectiveness of the ACA,” said Jim Stone, president of The Medicus Firm. Doctors gave the following grades for specific areas:

• 23% gave the ACA an A for improving access to healthcare, up from 12% last year. 27% gave the ACA a B for improving healthcare access. Only 14% of respondents failed the ACA in this category, down from 24% who gave it an F last year for this objective.
• 7% gave the ACA an A for improving efficiency compared to 6% last year.
• 30% gave the ACA an F for improving efficiency compared to 35% last year.

This year’s survey was conducted after the ACA was in full effect for several months.

Study Questions the Effectiveness of Medical Homes

The medical home has become a new model to produce better and lower-cost primary health care. But a Rand study found that medical homes yielded few improvements in the quality of care and no reductions in hospitalizations, emergency department visits, or total costs of care.

Medical homes are primary care practices that are designed to provide comprehensive, personalized, team-based care using patient registries, electronic health records, and other advanced capabilities. Recent medical home initiatives have encouraged primary care practices to invest in these new capabilities, participate in learning collaboratives, and achieve medical home recognition. Health plans offer to pay more to the practices that achieve recognition.

Researchers evaluated the Southeastern Pennsylvania Chronic Care Initiative. Thirty-two primary care practices and six health plans participated in the pilot from 2008 to 2011. Pilot practices adopted medical home capabilities, such as creating lists of patients who are overdue for the services they need. The medical homes did see improved rates for monitoring for kidney disease in diabetes patients, and there were signs that quality improved for some other aspects of diabetes care.  However, there were no improvements in the quality measures for asthma care, cancer screening, and control of diabetes. Also, there was no reduction in the use of hospitals or emergency departments, or the total costs of medical care.

Researchers say there are several reasons that the medical home pilot did not show broader improvements in cost and quality. The pilot emphasized quality of care for diabetes and asthma. But practices did not have the financial incentives to contain costs. While most participating practices adopted new capabilities that targeted quality of care, fewer increased night and weekend hours, which could have reduced unnecessary visits to the emergency room. Because the pilot practices volunteered for the medical home experiment, they may have been more quality-conscious than other practices even before the pilot began, which would limit possible improvements. For more information, visit

Last Updated 06/29/2022

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