QUESTIONS AND ANSWERS
Set forth below are questions and answers concerning
HSAs.
I. What Are HSAs and Who Can Have Them?
Q-1. What is an HSA ?
A-1. An HSA is a tax-exempt trust or custodial account
established exclusively for the purpose of paying
qualified medical expenses of the account beneficiary
who, for the months for which contributions are made to
an HSA , is covered under a high-deductible health plan.
Q-2. Who is eligible to establish an HSA ?
A-2. An “eligible individual” can establish an HSA . An
“eligible individual” means,
with respect to any month, any individual who: (1) is
covered under a high-deductible health plan (HDHP) on
the first day of such month; (2) is not also covered by
any other health plan that is not an HDHP (with certain
exceptions for plans providing certain limited types of
coverage); (3) is not entitled to benefits under
Medicare (generally, has not yet reached age 65); and
(4) may not be claimed as a dependent on another
person’s tax return.
Q-3. What is a "high-deductible health plan" (HDHP)?
A-3. Generally, an HDHP is a health plan that satisfies
certain requirements with respect to deductibles and
out-of-pocket expenses. Specifically, for self-only
coverage, an HDHP has an annual deductible of at least
$1,000 and annual out-of-pocket expenses required to be
paid (deductibles, co-payments and other amounts, but
not premiums) not exceeding $5,000. For family coverage,
an HDHP has an annual deductible of at least $2,000 and
annual out-of-pocket expenses required to be paid not
exceeding $10,000. In the case of family coverage, a
plan is an HDHP only if, under the terms of the plan and
without regard to which family member or members incur
expenses, no amounts are payable from the HDHP until the
family has incurred annual covered medical expenses in
excess of the minimum annual deductible. Amounts are
indexed for inflation. A plan does not fail to qualify
as an HDHP merely because it does not have a deductible
(or has a small deductible) for preventive care (e.g.,
first dollar coverage for preventive care).
However, except for preventive care, a plan may not
provide benefits for any year until the deductible for
that year is met. See A-4 and A-6 for special rules
regarding network plans and plans providing certain
types of coverage.
Example (1): A Plan provides coverage for A and his
family. The Plan provides for the payment of covered
medical expenses of any member of A’s family if the
member has incurred covered medical expenses during the
year in excess of $1,000 even if the family has not
incurred covered medical expenses in excess of $2,000.
If A incurred covered 3
medical expenses of $1,500 in a year, the Plan would pay
$500. Thus, benefits are
potentially available under the Plan even if the
family's covered medical expenses do not exceed $2,000.
Because the Plan provides family coverage with an annual
deductible of less than $2,000, the Plan is not an HDHP.
Example (2): Same facts as in example (1), except that
the Plan has a $5,000 family deductible and provides
payment for covered medical expenses if any member of
A’s family has incurred covered medical expenses during
the year in excess of $2,000. The Plan satisfies the
requirements for an HDHP with respect to the
deductibles. See A-12 for HSA contribution limits.
Q-4. What are the special rules for determining whether
a health plan that is a network plan meets the
requirements of an HDHP?
A-4. A network plan is a plan that generally provides
more favorable benefits for services provided by its
network of providers than for services provided outside
of the network. In the case of a plan using a network of
providers, the plan does not fail to be an HDHP (if it
would otherwise meet the requirements of an HDHP) solely
because the out-of pocket expense limits for services
provided outside of the network exceeds the maximum
annual out-of-pocket expense limits allowed for an HDHP.
In addition, the plan's annual deductible for out-of-
network services is not taken into account in
determining the annual contribution limit. Rather, the
annual contribution limit is determined by reference to
the deductible for services within the network.
Q-5. What kind of other health coverage makes an
individual ineligible for an HSA ?
A-5. Generally, an individual is ineligible for an HSA
if the individual, while covered
under an HDHP, is also covered under a health plan
(whether as an individual, spouse, or dependent) that is
not an HDHP. See also A-6.
Q-6. What other kinds of health coverage may an
individual maintain without losing
eligibility for an HSA ?
A-6. An individual does not fail to be eligible for an
HSA merely because, in addition to an HDHP, the
individual has coverage for any benefit provided by
“permitted
insurance .” Permitted insurance is insurance
under which substantially all of the coverage provided
relates to liabilities incurred under workers'
compensation laws, tort liabilities, liabilities
relating to ownership or use of property (e.g.,
auto insurance),
insurance for a specified disease
or illness, and insurance that pays a fixed amount per
day (or other period) of hospitalization.
In addition to permitted
insurance, an individual does
not fail to be eligible for an HSA merely because, in
addition to an HDHP, the individual has coverage
(whether provided through insurance or otherwise) for
accidents, disability,
dental care, vision care, or long
term care. If a plan that is intended to be an HDHP is
one in which substantially all of the coverage of the
plan is through permitted insurance or other coverage as
described in this answer, it is not an HDHP.
Q-7. Can a self-insured medical reimbursement plan
sponsored by an employer be an HDHP?
A-7. Yes.
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