Year ends with eyeglass rush

Consumers spending health funds while they can

December 12, 2007|By Meredith Cohn | Meredith Cohn,SUN REPORTER

The end of the year is approaching and that means one thing for the upscale eyewear shop Paris West Optical on Charles Street: sales.

It's not the typical rush to buy holiday gifts, but it is a rush to spend. Customers need to empty their flexible spending accounts, the pre-tax pot of money they set aside through their employers to pay for health care needs not covered by their insurance.

The money can be used for such things as dental visits, over-the-counter drugs - and glasses, which are pitched by retailers as a seasonal present to oneself rather than an account-draining binge on less appealing medicine cabinet should-haves.

"You can buy a lifetime supply of Geritol or a nice pair of glasses," said Jordan Flitter, owner of Paris West, who estimates that 80 percent of his December business is from flex account spending. "It's the same every year. Just before the new year, we do a lot of business."

The accounts have been around since the 1970s, and 80 percent of the nation's large businesses now offer them to employees as a benefit, according to the consulting firm Mercer LLC.

But participation has reached only about one in five of those eligible - even though the pre-tax plans mean savings on health care items - in part because of the accounts' "use it or lose it" provision. Money left in the account disappears at the end of the plan's year. Also, accounting for items approved by the Internal Revenue Service had been cumbersome.

But recent changes have given the accounts a boost, retailers say. Non-prescription drugs are now allowed, special debit cards mean less paperwork and, if employers agree, people can take 14 1/2 months rather than 12 months to spend their money.

Retailers say many people still have money left at the end of the year and make a run on the stores. Some put up signs in stores or advertise to remind customers to spend, including LensCrafters, the eyeglass and contact lens chain.

Holly Ingram, a spokeswoman for LensCrafters, said some people are trying to use insurance benefits in general but many have flex accounts and want to use the $100 or more they have left on one important purchase.

Some do go for the smaller items. The drug store chain CVS says sales are always up this time of year on drugs that treat colds and the flu. But that may be because more people get sick when it's cold or because they are stocking up with money from their flex accounts, a spokesman said.

Drugstore.com, which devotes a page on its Web site to FSA items, also says sales go up in December and stay high through mid-March, to when many companies have extended the spending deadline.

The site says top sellers include acid reducers, condoms, lens cleaning tissues, fertility monitors and hydrogen peroxide. Prices, for those looking to spend, range from $1.29 for a bottle of hydrogen peroxide solution to $1,249.99 for a home defibrillator.

There are more than 3,000 non-prescription items listed on drugstore.com's FSA page, created in 2005. Some are even bundled to show customers things they may want to buy, such as first-aid kits. The site also reminds buyers that pool of money can also be used to pay for insurance co-pays for prescription drugs and for contact lenses, also available through drugstore.com.

The company allows customers to keep track of their FSA purchases online and print receipts for their records or to submit for reimbursement. Customers have done that hundreds of thousands of times annually in the last couple of years.

The cashier part of the site is set up to recognize the FSA-approved items and prompts customers to pay for them with their provider's debit card and non-approved items with another card. New federal rules will require all retailers to track items this way to cut down on cheating.

"We wanted to make it easy for customers to use every dime in their accounts," said Karen Swaim, FSA marketing manager for drugstore.com. "They may not have known something like Band-Aids were approved."

Rule changes and improvements made by insurers has prompted more widespread use of the historically underused benefit, according to Aetna Inc., a large provider of such accounts to businesses. And it means less waste. Mercer says 2 to 4 percent of dollars now are forfeited.

Aetna put together packages to explain the value to employees, who typically have the option of signing up for a flex account once a year along with their health and life insurance. Many companies also offer pre-tax accounts for day care and transportation.

There's a calculator on Aetna's Web site to show the exact savings of putting aside money, depending on the size of the pot and the worker's tax status. Someone with a lot of out-of-pocket expenses, or with plans for corrective eye surgery, for example, could end up saving hundreds of dollars. The government does not cap the amount allowed in a health flex account, though some businesses do.

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