High Deductible Health Plan
(HDHP)
&
Health Savings Account (HSA)
Peru Community Schools
Fall, 2009
What is an HSA?
Qualified High Deductible Health Plan
Health Savings Account
In Network Coverage
Lifetime Maximum - $5,000,000
Health Care Expenses
Health Plan Pays
After you reach the out-of-pocket
maximum, the health plan pays 100% of
covered charges
You Pay
100% of the deductible
$3,000 - Single / $6,000 - Family
Preventive Care covered at 100%
• Intended to cover serious illness or injury
• IRS sets parameters on plan design
Examples: Minimum deductible levels;
no copayments for office visits
• Preventive care can be covered at 100%
HSA funds can be used for
qualified medical expenses
• Tax free growth
• Tax free distributions (for qualified expenses)
**MPL contributed $1,008 to employees who
elected the HSA plan on January 1, 2009. This
contribution was contributed in two equal sums in
January and mid-year.
What are Health Savings Accounts?
•
Congress created Health Savings Accounts (HSAs) to help individuals
save for qualified medical and retiree health expenses on a tax-free
basis.
• Pairs a qualified high deductible health plan with a savings account for
eligible individuals to help pay for qualified medical expenses
• Combines the pre-tax treatment of a health flexible spending account,
the portability and carry-over characteristics of a 401(k) plan, and
the tax-free distribution of a Roth IRA
For eligible individuals it is:
• Very similar to a personal checking/savings account that is owned by
you, the account holder, and used to pay for qualified medical
expenses
• You and/or your employer can fund the account
• The HSA is a “custodian account” held at a trustee/bank/Insurance
company
• Account balances can be carried over year to year
Who is Eligible?
• To be eligible to contribute to an HSA you:
– Must be covered by a qualified high deductible health
plan (HDHP)
– Cannot be enrolled in Medicare (generally age 65)
– Cannot be covered by other health insurance that is not
an HDHP
• Additional coverage for dental and vision is allowed
• Cannot have a broad based health Flexible Spending
Account through employer or spouse’s employer
– Cannot be eligible to be claimed as a dependent on
another persons taxes
– May not participate in both Section 125 FSA & HSA
How Does the HSA Work?
•
•
•
•
•
You enroll in the qualified high deductible health plan
You establish your HSA account
You and/or your employer make contributions to the account
You receive health care services
You pay your out of pocket costs associated with your
health plan (deductible and coinsurance)
• You decide whether to take money out of your HSA account
to reimburse yourself for “qualified” expenses
• The money in your HSA account that you do not use stays
with you and is available to use for future costs
What are “Qualified” Expenses?
• Qualified Medical Expenses are described in section
213(d) of the Internal Revenue Service code
– Refer to IRS Publication 502 for examples
• Health insurance premiums are not a qualified medical
expense except:
– For HSAs, the following can be reimbursed taxfree:
• COBRA premiums
• Qualified long term care premiums
• Health insurance premiums while unemployed and
receiving unemployment
• Medicare premiums (Part A, B, C, & D)
How Much Can I Contribute to an HSA?
The IRS determines the annual contribution limits
for HSA. These are based on either single or
family enrollment. The contribution limits can
change from year to year. For 2010 you may
contribute up to:
$3,050 Single
$6,150 Family
*Individuals age 55 and older can also make additional “catch-up”
contributions of $1,000 per year.
• Pros
Pros & Cons to Consider:
– Tax savings
– Potential retirement savings
– More control over how you choose to spend your health care
dollars
– Can help cover health expenses for periods of unemployment
– Lower health plan premiums
– HSA belongs to you and is portable – Employees currently
contributing to Section 125 FSA could deposit that same
amount in an HSA. With the HSA, there is no “use it or lose
it” rule
• Cons
– Employee is responsible for tracking expenses, monitoring HSA
contributions/distributions
– Must become better healthcare consumer
– Could result in higher out-of-pocket expenses, especially if you
don’t fully fund your HSA
Interested in an HSA?
•
Questions to Ask Your Bank or Other Financial Institution:
– How long have you been administering HSAs?
– How many HSA accounts are currently open through your
[bank, institution]?
– What is the minimum deposit required to open an HSA?
– Do you have a process in place to prevent me from
exceeding my annual contribution limit?
– What types of reports/statements will I get with my
HSA? How frequently are these provided?
– What account fees are associated with your HSA? Please
indicate ALL fees involved.
– How will I access my HSA funds; i.e. checks, debit card?
– What interest rates and investment options can you offer
and at what account balance would these become
available?
Employer Contribution Rules
Employers can make contributions to your employees' HSAs but
these must be “comparable” to all comparable participating
employees' HSAs. Your contributions are comparable if they
are either:
– the same amount, or
– the same percentage of the annual deductible limit under
the HDHP covering the employees
Exception: collectively bargained employees are not
comparable participating employees
Eligibility Guidelines for 1/1/2010
Question: Are all insurance eligible personnel or just employees
who already have Plan 1 or 2 allowed to transfer to Plan 3
(HDHP) 1/1/2010?
Answer: The HSA enrollment will only be a transfer period where
members who are already enrolled in one of the medical plans
can move to Plan 3 (HDHP). (Members not currently enrolled
could join any plan upon the experience of a HIPAA Qualifying
Event.)
Question: When can I transfer between medical plans within the
consortium? Can I transfer out of Plan 3 (HDHP)?
Answer: As it currently stands, there is an annual election period
for the consortium where members can move to a lower
costing plan each August for an October 1, effective date.
Because Plan 3 (HDHP) is the lowest cost plan, the only way
that you can move to Plan 1 or Plan 2 from Plan 3 is if you
experience a HIPAA Qualifying Event.
In Summary
• Individuals must be eligible to contribute to an
HSA; not required for distributions
• The individual is responsible for compliance with
IRS rules
• If you don’t use your HSA money, you keep it for
future years.
• Contributions are subject to limits determined in
reference to HDHP annual deductible and
statutory limits
• Contributions are tax free, earnings are tax free,
and distributions are tax free if used for
qualifying medical expenses
By taking time to understand how
each of the Group Health Plan
options affect you and your family,
you can make an informed choice that
will best meet your healthcare and
financial needs.
It’s Your Money!
What expenses can be paid by an HSA?
Your HSA covers a wide variety of medical expenses. These medical expenses must be necessary for the treatment or alleviation of a
specific illness or injury. They may include hospital or clinic services, prescription drugs and medications, certain over-the-counter drugs,
and many other health related expenses as defined by Section 213(d) of the Internal Revenue Code. Medical expenses covered under the
HSA can include expenses that are not covered under the high deductible health plan such as chiropractic, dental, orthodontia, or vision
expenses. For more information about eligible expenses, please consult Publication 502 available at your local IRS office or from the IRS
website: www.irs.qov.
Your HSA can also be used to pay premiums for COBRA, Medicare, long-term care insurance (federal limits apply), and health plan
coverage you may have while receiving unemployment compensation.
The following are examples of qualified medical expenses:
Acupuncture
Alcoholism Treatment
Ambulance
Artificial Limbs/Teeth
Aspirin
Bandages
Birth Control Pills
Blood Pressure Monitoring Devices
Blood Sugar Test Kit
Body Scan
Chelation (EDTA) Therapy
Chiropractors
Circumcision
Copays/Deductibles
Condoms
Contact Lenses/Related Material
Contraceptives
Counseling (excludes marriage)
Crutches
Dental Treatment
Dentures
Diabetic Supplies
Diagnostic Services
Drug Treatment
Drugs/Medicines
Egg Donor Fees
Eye Exams/Glasses
Fertility Treatment
Flu Shots
Glucose Monitoring Devices
Guide Dog
Hearing Aids
Home Care
Hormone Replacement Therapy
Hospital Services
Immunizations
lnclinator
Insulin
Laboratory Fees
Laser Eye Surgery
Learning Disability
Medical Records Charge
Medical Services
Medications/Drugs
Nursing Services
Obstetrical Expenses
Occlusal Guards
Operations
Optometrist
Organ Donors
Orthodontia
Osteopath
Over-the-counter Drugs/Medicines
Ovulation Monitor
Oxygen
Physical Exams
Physical Therapy
Pregnancy Test
Prescription Drugs
Prosthesis
Psychiatric Care
Psychoanalysis
Psychologist
Reading Glasses
Screening Tests
Sleep Deprivation Treatment
Smoking Cessation Programs
Sterilization Procedures
Supplies for Medical Condition
Surgery
Therapy
Transplants
Vaccines
Vasectomy
Vision Correction Procedures
Wheelchair
X-Ray Fees
Questions?
For more information, please refer to the
United States Department of Treasury
website:
http://www.ustreas.gov/offices/ publicaffairs/hsa/