FSA contributions are pre-tax, so there's a benefit to the employee for all the rigamarole. Personally, my predictable eligible expenses were not usually at a level where it made sense, and then the one time I thought it did, the billing didn't match, so I had to find extra things to expense, and it was a giant pain. Especially when the rules changed and over the counter medication was no longer eligible.

Clearly, the financial companies behind this have an actuarial interest. And the employers have something to check off; not sure if they also get to save on some payroll tax on the elected amount?

I don't mean "why would people use it", I can see benefits for sure, it's just so... contrived... that it really seems like a terrible implementation of whatever the government/companies actually meant to incentivize.

It's better than nothing at all, but it definitely seems worse than a lot of other ways this could have been implemented.

The alternative is probably just deducting medical costs, but that's worse: can't do it unless your costs are significant (there's a % of income required and it needs to get over the standard deduction too). But yeah. Pretty terrible.

corruption and anti worker sentiment on all levels.

other answer is already underneath the framing that it exists and will try to justify it within the system.

all benefits, specially the few one code in law, serve to create the illusion of belonging to a different class while oppressing so you keep that class engaged in production.

so, existis for the same reason a complicated tax code does.