Without including the value of FSAs and HSAs toward a cap on the amount of tax-free benefits, the cap likely would not work as intended, because employers could shift health costs that would otherwise be counted as taxable income into employees’ tax-advantaged accounts.

“Somehow, there can’t be a double dip,” Baucus, D-Mont., said Wednesday in response to a question about the future of FSAs. He continued to emphasize that no decision has been made on limiting the tax exclusion.

FSA supporters are concerned about the potential for other changes to the accounts — or their outright elimination. For instance, they are fighting back against critics who contend that the plans, particularly the use-it-or-lose-it rules, encourage people to waste money for fear of forfeiting it.

“To get a modest benefit, you have to put up with the hassle of saving receipts all year and then, at the end of the year, rush to buy things you don’t need,” said Chuck Marr, director of federal tax policy for the liberal Center on Budget and Policy Priorities.

Dennis Triplett, board chairman of the Employers Council on Flexible Compensation, said any limits on FSAs “are, in effect, putting a tax increase on working Americans,” Triplett said.

Ric Joyner, CEO of eflexgroup.com, an employee benefits administrator in Madison, Wis., said the debate is already having an effect on the industry. Upon learning of potential changes to FSAs, Joyner said he put long-term business plans on hold, and he worries about the future of his company, which manages about 80,000 accounts.

“A lot of our employees who voted for Obama are scared as heck,” he said.

While President Obama spoke out against taxing employer-provided health benefits during last year’s campaign, there are signs he may be more open to the idea now.

Baucus Voices HSA Support

For Health Savings Accounts, the biggest concern is a mandate that high-deductible health insurance plans would be required to cover certain procedures without charging patients a deductible, said Dan Perrin, president of the HSA Coalition, a group that includes doctors, dentists, banks and insurance companies.

“If you want to destroy HSAs without publicly taking them out and executing them, you load up things below the deductible that have to be covered, which means that the entire concept of an HSA goes out the window,” he said.

On Wednesday, Baucus called HSAs “important,” and said he wanted to make sure that companies could continue to offer HSAs and that they were an option in the health-insurance exchange being created by his bill.

Baucus’ support is important because for the past few years, HSAs, created by a Republican Congress and largely touted by Republicans, have been seen as a partisan issue.

HSA advocates are concerned about a potential requirement that account holders “substantiate” their expenses to prove that they are spending their money on medical expenses.

Substantiation is already required for FSAs. But HSA payments are treated like most other provisions in the tax code, subject to penalties and extra taxes only if the IRS finds anything improper through an audit.

But Perrin said he thinks the substantiation issue could be worked out.

HSA lobbyists are also emphasizing the savings component of the accounts. After age 65, distributions can be used for any purpose without penalty, as long as taxes are paid on non-medical distributions.

“It is in everybody’s best interest to encourage a greater savings rate,” said Kevin McKechnie, staff director of the HSA Council, an arm of the American Bankers Association.