Flex Benefits Will Survive After Health-Care Reform

WHEN President Clinton unveiled his proposed health-care package, critics lamented that companies' flexible benefits programs would disappear without tax advantages for health-care coverage and expenses.

Not true, counters a new study by Towers Perrin, a management consulting firm based in New York. The study shows that most flex sponsors would continue, and in many cases expand, their flexible benefit programs under comprehensive health-care reform. Of the 133 companies surveyed, 80 percent said they would continue their flex programs after reform. More than three-fourths said they would provide supplemental health benefits beyond a mandated standard package even if those benefits were no longer tax-deductible.

Health reform does not mean the end of flexible benefits programs ``because, for many flex sponsors and their employees, flex simply isn't only about tax advantages,'' says Patricia Milligan, who heads up Towers Perrin's flexible benefits consulting practice. ``It's about employee choice - and the role choice plays in meeting a variety of human resource and business objectives.''

The companies who said they would expand their flex programs are considering adding more traditional-benefit choices, such as life insurance and retirement, as well as nontraditional choices, such as vacation buy/sell options, financial planning services, and long-term care insurance.

For a majority of the companies, the only flex option that would disappear is flexible spending accounts, which give employees an option to set aside pretax earnings to pay qualifying medical care costs. More than two-thirds of the respondents said they would eliminate flexible spending accounts if those accounts lose their tax-favored status.

The companies clearly are concerned about rising health-benefit costs under a reform package. Forty-four percent of the respondents said their reaction to higher costs would be to reduce other nonhealth benefits; 40 percent said they would absorb the added costs; 39 percent said they would pass the costs on to customers; and 36 percent said they would likely reduce jobs.