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1. Q: What is a Health Savings
Account? |
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Insider: Health
Savings Accounts are a new option for health insurance and they have
two parts. The first part is a health insurance policy that covers
large hospital bills. The second part of the Health Savings Account
is an investment account or retirement account from which you can
withdraw money tax-free for medical care. Otherwise, the money
accumulates with tax-free interest until retirement, when you can
withdraw for any purpose and pay normal income taxes. |
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2. Q: Where does the money deposited
in the account come from? |
Insider: The
money comes from refinancing your current health insurance.
The average cost of health insurance was $9,068.00 for a family in
2003 in the U.S., according to the Kaiser Foundation. That is how
much money on average, per family, was spent last year on family
health care insurance coverage (HMOs, PPOs, fee for service plans)
in the United States.
Remember HSAs are two parts: an insurance policy and a tax-free
account. So, if you take $3,000.00 of that $9,068.00 (leaving
$6,068.00 unspent) and you or your employer purchase a health
insurance policy that covers your medical expenses above $5,1,50.00,
the high deductible health insurance plan is in place.
Now, according to the law, you are allowed to deposit – tax free –
up to $5,150.00 to pay for the routine medical care. Withdrawals for
medical care are tax-free. Your insurance company may administer the
account or you can open the account with an HSA administrator like
FirstMSA (www.firstmsa.com) or MSABank (www.msabank.com) or Prime
Healthcare (www.webhealthsavingsaccount.com) or a local bank that
offers Health Savings Accounts.
To review, out of the $9,068.00, you spent $3,000.00 on a health
insurance policy with a $5,150.00 deductible. The insurance covers
your family’s health care costs that exceed the $5,150.00
deductible.
Out of the $6,068.00 remaining, you and your employer deposit
$5,150.00 into your health savings account. It is now your money. If
you leave your employer, it is still your money. It follows you.
What you do not spend out of the account rolls over, so if you and
your family only have health costs of $2,000.00 this year, you and
your family would have $3,150.00 remaining in your Health Savings
Account. So, next year, you will start your Health Savings Account
with $3,150.00, plus the interest you earned, and you and your
employer will add another $5,150.00 to your account, giving you
($5,150.00 + $3,150.00 = $8,300.00) to spend next year.
So, you and your employer just saved $918.00 in health care costs in
the example above.
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Comparing Current Health Insurance Costs to Current Health
Savings Accounts
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| $755.67: |
Average monthly premium for average 2003
Family Health Insurance |
| $9,068: |
Annual 2003 Cost of Family Health Insurance
in the U.S. according to the Kaiser Foundation |
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Family Medical Savings Account Offered in Florida
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| $234: |
Monthly Premium for a $5,150 Deductible HSA
Family Health Insurance Policy (40 to 49 yr. old primary
insured) |
| $2,808: |
Annual Premium for a $5,150 Deductible
Family Health Insurance Policy |
| $5,150: |
$5,150: Goes
in your pocket, into your Health Savings Account
(instead of paying the insurance company for higher
premiums, you keep this money for you and your family) |
$7,958: |
Total cost of Premium and 100% Funded HSA |
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Compare Costs:
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| $9,068: |
Annual 2003 Cost of Family Health Insurance
in the U.S. according to the Kaiser Foundation |
| $7,958: |
Total cost of Premium and 100% Funded HSA |
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$1,100 |
 Savings
a Year with a Fully Funded HSA |
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3. Q: Why should I have a Health
Saving Account for me or my family? |
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Insider: If
you or your employer are tired of sending hundreds and hundreds of
dollars each month to your health insurance company, and would
prefer to keep a big chunk of that money for yourself to spend on
health expenses or save it for the future, then you need to look
into a Health Savings Account. |
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4. Q: What other advantages do Health
Savings Accounts have over traditional health insurance? |
Insider: If
you are unemployed or laid off and are collecting unemployment
insurance, then you can use funds from your Health Savings Account
to pay for your health insurance premium and for your routine health
expenses -- all tax-free.
Another advantage is that you can spend tax-free money out of your
Health Savings Account for long term care insurance. |
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5. Q: Do I have an HSA qualified
health insurance plan? |
Insider: Do
I have a HSA Qualified health insurance policy?
The quickest way to find out if your health insurance plan is HSA
qualified, is to ask your health insurance company. If they say
‘yes,’ then you know your health plan qualifies you to open an HSA.
Or, if your insurer offers both the insurance and the HSA account
for the health insurance policy you have, then the policy is clearly
HSA qualified.
For those whose employer provides your health insurance, ask your
employer. If they do not know, they should ask the insurer on behalf
of the employees.
Some visitors to our web site (and members of the HSA Coalition)
have reported – essentially – that their insurer will not tell them
if their policy is HSA qualified or not.
Why that is, I can only speculate: the insurer’s lawyers are worried
that because the final, set-in-stone Treasury rulings have not all
been issued yet, and the insurer is reluctant to tell its policy
holders if their policy is HSA qualified. Some insurers – apparently
- refuse to answer this straight-forward question.
In that case, I recommend voting with your check book, and get a new
insurance policy with a company that will tell whether their
insurance policy is HSA qualified. In all seriousness, find a new
insurer.
If, for whatever reason, you do not want to leave your insurer, here
some general guidelines in the form of several questions you need to
answer, to find out if your health insurance plan is an HSA
qualified plan:
For family health insurance plans:
Is the annual deductible between $2,000 and $10,000? If the answer
is yes, you are OK, so far. If the answer is no (either the
deductible is less than $2,000 or more than $10,000) then you do not
have an HSA qualified plan.
Does your family insurance plan have a comprehensive deductible? For
example, if one person spends $1,000, and the other $800, and a
third person has expenses of $1,200, each expenditure counts toward
the $3,000 deductible, and your deductible is met when all
expenditures exceed the deductible? If you answered yes, then your
plan qualifies.
If, on the other hand, your family plan has a deductible that fits
in the HSA compatible deductible range, but allows for individual
family members to be covered by the insurance if their expenditures
reach a certain dollar amount below the overall deductible, then no,
your plan does not qualify. For example, if your family deductible
is $3,000, but if a family member incurs expenses that exceed $1,500
then that family member’s future expenses are covered by the health
insurance, then no, you do not have a HSA qualified plan.
You could have another kind of plan where the deductible for the
entire family is $4,000, but the insurance starts to pay benefits
for each family member at $2,250. This meets the minimum family
deductible (of $2,000) for an HSA qualified deductible. So this plan
qualifies -- but -- and this is a big but -- you can only contribute
$2,250 to the HSA for the entire family. So, you would be better
off, getting a health insurance plan with on deductible -- the
higher the better -- so you could put that amount into your HSA.
Does your maximum out-of-pocket amount per year for your family plan
exceed $10,000? If yes, you do not have a HSA qualified health
insurance plan.
For health insurance plans for singles:
Is your annual deductible more than $1,000 and less than $5,000? If
yes, then you are OK so far, in terms of having a HSA qualified
plan.
Does your maximum out-of-pocket expenditure for your single
insurance plan exceed $5,000? If so, it does not qualify as a HSA
qualified health insurance plan.
For both family and single health insurance plans:
Do you pay co-pays before you reach the deductible? If yes, then you
do not have a HSA qualified plan, unless the co-pay is for
prescription drugs. In that case, your health insurance will qualify
for an HSA until 1/1/2006 because the U.S. Treasury has issued
special transition rules for such plans. However, if you pay co-pays
for prescription drugs, or are otherwise insured below your
deductible for prescription drugs, the drug coverage you have must
be a separate plan or a rider to your plan. You can go to the U.S.
Treasury section of this web site (button on the left side of the
Home Page) to read the Media Release about this transition rule, or
the actual HSA transition rule issued by Treasury.
If your plan meets all the requirements listed above, it is an HSA
compatible plan.
Remember, the maximum HSA deposit for a family cannot exceed the
deductible, or in the case of a deductible higher than $5,150, the
HSA deposit cannot exceed $5,150 in 2004.
For single individuals, your maximum HSA deposit can not exceed your
deductible, and in cases of a deductible higher than $2,600, your
HSA deposit cannot exceed $2,600 in 2004.
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6. Q: Can I open an HSA myself? |
Insider: Some
insurers will offer you the insurance policy and the Health Savings
Account, so you will not have to open a separate account. Other
insurers offer just the insurance policy, and you will have to find
a bank or other trustee to open your Health Savings Account. The two
largest Health Savings Account trustees are MSABank and FirstMSA,
and are located on the web at
www.msabank.com
and
www.firstmsa.com.
You can get a comprehensive list of trustees who can open a Health
Savings Account for you by going to the box on our home page titled:
"Who Can Open My Health Savings Account?" and you will see a list of
trustees, their fees and interest rates, as well as a link to their
web site and other contact information. |
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8. Q: Why would some one who is less
healthy want a Health Savings Account? |
Insider: There
are two key reasons the less healthy should choose an Health Savings
Account.
The first reason is to have control over their own health care
decisions and treatments, including their prescription drugs.
With an HMO, the sick must face the rationing regime in place by
HMOs to contain costs, which includes a frustrating waiting list to
see a specialist and treatment and prescription drug formularies
that may not have the most up-to-date treatments or brand name drugs
that would make them feel the best.
The second reason is a financial incentive.
Assuming the less healthy would rather not be in an HMO or other
managed care plan, then they would likely choose a fee-for-service
plan. The standard fee-for-service plan has a $500 deductible, with
a 20% co-pay of the next $5,000. This means the person would pay
$500 for the deductible, and $1,000 for 20% of $5,000, before being
covered 100%.
That is $1,500 in after-tax income to be insured 100% for someone
who is less healthy in a traditional, low deductible,
fee-for-service health insurance plan.
With a Health Savings Account, the same individual would pay a much
smaller premium, and in most cases, the savings fund a majority of
the deductible in their Health Savings Account.
With a $1,700 deductible, and, say $1,500 deposited tax-free in the
Health Savings Account, the less healthy individual with an HSA
would have to come up with $200 in after tax money to be covered
100%. ($1,700 deductible minus $1,500 from the Health Savings
Account equals $200 to meet the deductible).
So the choice for a less healthy individual in a fee for service
plan is: (1) pay $1,500 in after-tax funds to pay to be covered 100%
by their insurance, or (2) with an HSA, pay $200 in after tax money
to be covered 100%.
The less healthy, therefore, have a financial incentive to choose a
Health Savings Account. |
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9. Q: How much money could build up in
my Health Savings Account over time? |
Insider:
• Click here to see the possible build up of Health
Savings Account funds for families.
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Possible Build-Up of Savings
For Families With An HSA Under
Different Time and Medical Expense Scenarios |
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Account Balance After X Years |
Age of Head of Household Starting at 30 | Health Savings
Account Balances(Assumes a $4,000 Deductible and Deposit
Each Yr.) |
| After Family Medical
Expenses of $1,000 Each Yr |
After Family Medical
Expenses of $500 Each Yr |
Zero Family Medical Expenses |
| 5 Years |
35 |
$17,406 |
$20,307 |
$23,208 |
| 10 Years |
40 |
$39,620 |
$46,224 |
$52,827 |
| 15 Years |
45 |
$67,972 |
$79,301 |
$90,630 |
| 20 Years |
50 |
$104,158 |
$121,517 |
$138,877 |
| 25 Years |
55 |
$150,340 |
$175,397 |
$200,454 |
| 30 Years |
60 |
$209,282 |
$244,163 |
$279,043 |
| 35 Years |
65 |
$284,509 |
$331,927 |
$379,345 |
| Assumes 5% interest per year,
and 100% of a $4,000 deductible is deposited each year. One
Medical Savings Account insurer has paid 5% interest on
balances in their Medical Savings Accounts since January 1,
1997, and has not changed their interest rate since 1/1/97.
Source: The HSA Coalition |
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• Click here to see the possible build up of Health
Savings Account funds for individuals.
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Possible Build-Up of Savings
For Individuals With An HSA
Under Different Time and Medical Expense Scenarios |
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Account Balance After X Years |
Age of Head of Household Starting at 25 |
Health Savings
Account Balances(Assumes a $2,000 Deductible and Deposit
Each Yr.) |
| After Individual Medical
Expenses of $1,000 Each Yr | After Individual Medical
Expenses of $500 Each Yr |
Zero Individual Medical
Expenses |
| 5 Years |
30 |
$5,802 |
$8,703 |
$11,604 |
| 10 Years |
35 |
$13,207 |
$19,810 |
$26,414 |
| 15 Years |
40 |
$22,657 |
$33,986 |
$45,315 |
| 20 Years |
45 |
$34,719 |
$52,079 |
$69,439 |
| 25 Years |
50 |
$50,113 |
$75,170 |
$100,227 |
| 30 Years |
55 |
$69,761 |
$104,641 |
$139,522 |
| 35 Years |
60 |
$94,836 |
$142,254 |
$189,673 |
| 40 Years |
65 |
$126,840 |
$190,260 |
$253,680 |
| Assumes 5% interest per year,
and 100% of a $2,000 deductible is deposited each year. One
Medical Savings Account insurer has paid 5% interest on
balances in their Medical Savings Accounts since January 1,
1997, and has not changed their interest rate since 1/1/97.
Source: The HSA Coalition, 2004 |
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Note, that these charts shown in pop-up windows, do not reflect the
maximum amount of money that can be built up, if the maximum
allowable deposits into the health savings account are made each
year. The maximum allowable amounts for 2004 are $5,150.00 for a
family, and $2,600.00 for an individual. The charts assume $4,000.00
per year deposit for families, and a $2,000.00 per year deposit for
an individual. |
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10. Q: Is there an IRS approved list
of medical expenses that I can spend my tax free Health Savings
Accounts funds on? |
Insider: Yes,
there is list of allowable expenses published by the U.S. Treasury
Department, actually the Internal Revenue Service, referred
generally as the ‘213 (d)’ list, since it appears in IRS regulation
213 (d). Here is a link to the list of allowable/not allowable
expenditures:
http://www.irs.gov/pub/irs-pdf/p502.pdf.
In general, you can spend tax-free from your Health Savings Account
on all medical, dental (including braces for your children), and
vision expenses, chiropractic visits, and even acupuncture, but not
on your insurance premium, unless you are unemployed and are
collecting Federal unemployment benefits. |
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11. Q: What options for deductibles
and out-of-pocket maximums are insurers allowed to offer to
employers or individual consumers? |
Insider:
Click here for a handy chart outlining the Health Savings
Account deductible and out-of-pocket maximums allowed by the Health
Savings Account law.
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Health Saving Accounts |
Maximum Deductable |
Maximum Out-of-Pocket |
Maximum HSA Deposit |
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Single |
$1,000.00 |
$5,000.00 |
$1,000.00 |
| $1,700.00 |
$5,000.00 |
$1,700.00 |
| $2,600.00 |
$5,000.00 |
$2,600.00 |
| $5.000,00 |
$5,000.00 |
$2,600.00 |
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Family, Husband & Wife or Parent &
Children |
$2,000.00 |
$10,000.00 |
$2,000.00 |
| $3,450.00 |
$10,000.00 |
$3,450.00 |
| $5,150.00 |
$10,000.00 |
$5,150.00 |
| $10,000.00 |
$10,000.00 |
$5,150.00 |
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For those individuals 55 years old or older, the law allows an
additional "catch up" deposit. Catch up deposits start at $500
in 2004 and go up by $100 each year, until the maximum catch up
amount is reached, which is $1,000. If both the husband and wife
are 55 or older, they could both use the catch up provision. |
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12. Q: Does the maximum out of pocket
include the deductible? |
Insider: Yes. |
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13. Q: Can a copay prescription card
be offered under a qualified high deductible plan? |
Insider: The
U.S. Department of the Treasury has recently stated that those with
a health insurance plan that is in all other respects HSA
compatible, except that it provides prescription drug coverage below
the deductible, can have an HSA until 1/1/2006. This is how the U.S.
Department of Treasury’s media release described this recent
Treasury ruling:
http://www.hsainsider.com/treasury/treasury_7.pdf
INTERACTION OF HDHP BENEFITS WITH PRESCRIPTION BENEFITS AND
TRANSITIONAL RELIEF Prior guidance noted that an eligible individual
must be covered by an HDHP and generally no other health plan that
is not an HDHP. Guidance issued today clarifies that individuals
covered by a health plan that provides prescription drug benefits
before the minimum annual deductible of an HDHP has been satisfied
may not make contributions to an HSA. However, companion guidance
also issued provides transition relief to those individuals covered
by both an HDHP and by a separate health plan or rider that provides
prescription drug benefits before the deductible of the HDHP is
satisfied. Under the relief, such individuals continue to be
eligible to contribute to HSAs before 2006.
If you want to read the full text of the Ruling, go to:
http://www.hsainsider.com/treasury/treasury_3.pdf
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14. Q: If you purchase a HSA-capatible
healthcare plan and that you incur expenses that the plan doesn't
allow - such as over their "reasonable and customary" schedule. Can
you pay for that amount (over the "reasonable and customary") even
if it does not go towards meeting the deductible unde the health
insurance plan. |
Insider: Yes. |
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15. Q: How long have HSA accounts been
available? |
Insider: The
law became effective January 1, 2004, and was signed into law by the
President in early December, 2003. |
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16. Q: Eligibility? |
Insider: Here
is the U.S. Department of Treasury's answer, which can be found at:
http://www.treas.gov/offices/public-affairs/hsa/faq2.html#hsa3
Who is eligible for a Health Savings Account?
To be eligible for a Health Savings Account, an individual must be
covered by a High Deductible Health Plan (HDHP), must not be covered
by other health insurance (does not apply to specific injury
insurance and accident, disability, dental care, vision care,
long-term care), is not eligible for Medicare, and can’t be claimed
as a dependent on someone else’s tax return.
What Is a “High Deductible Health Plan” (HDHP)?
A HDHP is a health insurance plan with minimum deductible of $1,000
(self-only coverage) or $2,000 (family coverage). The annual
out-of-pocket (including deductibles and co-pays) cannot exceed
$5,000 (self-only coverage) or $10,000 (family coverage). HDHPs can
have first dollar coverage (no deductible) for preventive care and
higher out-of-pocket (copays & coinsurance) for non-network
services.
For information about if your health insurance plan is HSA
qualified, go to question number 5 under HSA Basics (click on the
button on the left hand side of this page.) |
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17. Q: Did I have to set up the hsa by
the end of 2003 (like and ira) or can I do it now to still get the
tax saving benefits for last year? (thanks for this excellent site
and service.) |
Insider: HSAs
did not exist last year. The law authorizing them was signed by
President Bush in early December (and was part of the Medicare Rx
bill) and the HSA section became effective on 1/1/04. You would have
to have had a Medical Savings Account last year to get a tax benefit
for 2003. |
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18. Q: I understand copay plans are
not eligible. Do prescription drug copay riders fall under that
rule? |
Insider: The
U.S. Department of the Treasury has recently stated that those with
a health insurance plan that is in all other respects HSA
compatible, except that it provides prescription drug coverage below
the deductible, then until 1/1/2006, such persons can have an HSA.
This is how the U.S. Department of Treasury’s media release
described this recent Treasury ruling:
http://www.hsainsider.com/treasury/treasury_7.pdf
INTERACTION OF HDHP BENEFITS WITH PRESCRIPTION BENEFITS AND
TRANSITIONAL RELIEF Prior guidance noted that an eligible individual
must be covered by an HDHP and generally no other health plan that
is not an HDHP. Guidance issued today clarifies that individuals
covered by a health plan that provides prescription drug benefits
before the minimum annual deductible of an HDHP has been satisfied
may not make contributions to an HSA. However, companion guidance
also issued provides transition relief to those individuals covered
by both an HDHP and by a separate health plan or rider that provides
prescription drug benefits before the deductible of the HDHP is
satisfied. Under the relief, such individuals continue to be
eligible to contribute to HSAs before 2006.
If you want to read the full text of the Ruling, go to:
http://www.hsainsider.com/treasury/treasury_3.pdf |
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19. Q: Can I contribute to this plan
up till April 15th, 2005 to obtain a deduction for 2004? |
Insider: Yes,
provided, of course you have HSA qualified insurance, and the
maximum deductible amount is pro-rated based on the first full month
your high deductible health plan was in place.
To answer the question "What happens if on day two of having an HSA,
am hospitalized, and do not have enough money built up in the
account?" some insurers are selling a hospitalization rider (with a
one time fee) that allows individuals or employees to be paid the
amount they would have deposited into the HSA over the course of
more than a year, if they are hospitalized in the initial months of
having an HSA.
The way that one insurer's rider works is that if in the third month
of the HSA being in force the HSA policy holder is hospitalized for
three days, the insurance company sends the insured a check for the
deductible minus an assumed amount of three months deposit into the
HSA account. (The rider does not assume the maximum allowable amount
is deposited each month.)
So, in the case of this insurer, with this type of rider, the HSA
insured uses this money paid to them to meet their deductible
expenses, and their high deductible health insurance covers their
other hospitalization costs, once their deductible is met. |
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20. Q: I carry a private $2K
deductible health ins. policy. Can I combine that with just the
investment/savings part of an HSA? Can my ins. premiums be paid
through the HSA? |
Insider: Your
insurer is the best one to answer that question, but assuming your
health plan qualifies (and the deductible does qualify) then yes,
you can just combine it with an HSA you open somewhere else. The
only time you can pay your premium out of your HSA is when you are
unemployed and are collecting unemployment. Please see the question
(and answer) for "Do I have an HSA qualified health plan?" in this
section (Question number 5 in the HSA Basics section) of this web
site. |
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21. Q: Who is eligible to open an HSA?
Are there income restrictions similar to an IRA? Does an individual
need to meet other guidelines? |
Insider: The
HSA eligibility criteria is simply that the health plan that the
employee or the individual has conforms to the HSA qualified health
insurance criteria. There are no income limits (we fought hard for
that). To find out if your plan meets the criteria, go to the HSA
Basics section (see button on the left hand side of the home page)
and look under the question "Do I have an HSA qualified health
plan?" |
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22. Q: What is an Archer Medical
Savings Account? |
Insider: An
Archer Medical Savings Account was the pilot project version of
Health Savings Accounts. An Archer Medical Savings Account has
numerous and confusing restrictions on who could use an Archer MSA
and how it could be funded. These restrictions have been lifted. The
Health Savings Account is the unrestricted version of an Archer MSA.
You should not purchase an Archer MSA (even if you can find one.)
The restrictions on Archer MSAs were extensive: MSAs were allowed
for only those whose company had 50 or fewer employees and for the
self-employeed. HSAs are available to everyone under 65, and there
are no limits ont he size of the company that can use them.
Furthermore, MSAs limited the deposit into the account to only the
employee or the employer, not both. The HSA allows both the employee
and the employer to contribute into the account. The MSA had a
numerical cap on the total number of MSAs that could be sold, and it
had a sunset provision which would have ended the pilot program
totally. That provision served to keep insurers out of the market,
so there were very few MSA insurers. HSAs are permanent. Finally,
there was a limit of 65% of the deductible that could be deposited
into the MSA for individuals, and a limit of 75% of the deductible
that could be deposited into the MSA for family plans. With HSAs you
can deposit 100% of the deductible, up to $5,150 for families and
$2,600 for individuals.
All of these restrictions on MSAs were brought to the U.S. by
Senator Ted Kennedy, who really, really can't stand HSAs or MSAs.
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23. Q: Can HSA accumulated funds
eventually be used to pay for eldercare or nursing home/retirement
facility? |
Insider: Yes,
in fact, even before you reach that point you can pay for long term
care insurance premiums with tax-free money out of your Health
Savings Account. |
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24. Q: Can you expand on the statement
that the contributions to an HSA is tax free. Is the contribution an
individual makes to a non employer sponsored HSA a deductable
expense to the individual?
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Insider: For
individuals with a non-employer sponsored HSA, the HSA deduction
will likely appear on the 1040 in the adjusted gross income section
of the tax return. Contributions are tax free to individuals through
an above the line deduction. They are pre-tax for an employer or
employee in an employer provided plan. |
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25. Q: Is there a list of over the
counter drugs that are always/never/somtimes covered under an HRA |
Insider: Did
you mean HRA or HSA? You can purchase over the counter drugs every
day of the week from your Health Savings Account. |
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26. Q: Will I pay tax penalties on the
monthly fees my HSA custodian deducts from my account? (These aren't
qualified medical expenses.) |
Insider: The
IRS has ruled that nominal bank and custodial fees withdrawn
directly from the account are allowable withdrawals, and therefore,
are not subject to taxes or penalties. Some trustees allow their HSA
clients to choose their method of payment for custodial fees, with
either a monthly debit from the account or by a check paid annually. |
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27. Q: Can I use my Health Savings
Account for non-medical expenses? |
Insider: This
is the classic, ‘Can I go to Disney World with the money from my
Health Savings Account’ question. The answer is, yes, you can spend
money out of your Health Savings Account for non-medical expenses,
but you have to pay income tax and a 10% penalty for a non-medical
withdrawal prior to age 65.
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28. Q: Why were 25% of Archer MSAs
purchased by those who had been uninsured for six months or more in
2001? |
Insider: In
2001, which is the last year that data exists from the IRS, 25% of
those who purchased an Archer MSA were previously uninsured. The
most rational explanation for this high percentage of people
purchasing an Archer MSA is the low cost of a high deductible health
insurance plan. (As the deductible increases, the premium decreases,
making a high deductible health insurance plan much more affordable
than traditional health insurance.) For the uninsured, the price of
health insurance makes a big difference as to whether they are
insured or not.
In other words, for those who cannot afford a traditional health
insurance plan, but still want protection against bankruptcy from an
unexpected hospitalization, then a high deductible insurance plan is
the best solution. |
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29. Q: Once I qualify for Medicare
(hit the age of 65 yrs. old) can I get a Medicare Health Savings
Account? |
Insider: Not
yet, but the Medicare Prescription Drug bill fixed the Medicare
Medical Savings Account section to remove the regulatory impediments
put in by the Clinton Administration. Medicare is now reviewing the
changes to the old Medicare MSA law, and will be issuing new
regulations later this year. Once those new regulations are issued,
it is likely Medicare Savings Accounts will be offered to Medicare
seniors.
HSAs are called Medicare Savings Accounts and will be available as
soon as Medicare issues new regulations based on the changes to that
were made in the already existing provision of the Medicare law,
which were contained in the Medicare Prescription Drug bill signed
into law by the President in December, 2003.
Here is the latest item issued by Medicare, with regard to the
Medicare Savings Accounts:
Medicare: Today’s Issue
April 7, 2004
BETTER BENEFITS – MORE CHOICES
Good News about the Medicare Prescription Drug, Improvement
and Modernization Act of 2003!
Medicare Savings Accounts (MSAs)
Extension of MSAs
Under the Medicare Prescription Drug, Improvement, and Modernization
Act (MMA), the Medicare Savings Account (MSA) program becomes a
permanent option to beneficiaries. Additionally, the former capacity
limit on the number of enrollees is removed, and the deadline for
enrollment is eliminated.
Background
The Balanced Budget Act (BBA) of 1997 authorized a Medicare +
Choice MSA demonstration project that allowed up to 390,000
beneficiaries to enroll with enrollment closing on December 31,
2002. However, no plans entered into agreements to offer this option
to beneficiaries. Without the capacity limit and enrollment
deadline, the MMA makes this option more attractive for plans and
beneficiaries.
MSAs were one of the new Medicare plan options authorized by the
BBA. Under this option, the beneficiary chooses a Medicare MSA
qualifying high deductible insurance plan. Medicare then pays the
premium for the MSA plan and makes a deposit into the Medicare MSA
that is established by the beneficiary. The beneficiary uses the
money in the Medicare MSA to pay for services provided before the
deductible is met and for other services not covered by the MSA
plan. Any remaining funds are allowed to accrue from year to year.
The MSA option is premised on the need for beneficiaries to play a
greater role in their health care purchasing decisions. |
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30. Q: What if I die, what happens to
the money in my Health Savings Account?
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Insider: The
HSA goes to your named beneficiary. If you designate your spouse,
the money is tax-free. If your beneficiary is someone else, he or
she generally will owe income tax but no penalty.
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31. Q: What happens to my Health
Savings Account funds when I die? Can I leave it to my children? |
Insider: If
the named beneficiary in your will is your spouse, the spouse
continues to access the Health Savings Accounts funds tax-free for
medical expenses and pay income taxes on any non-medical expense. If
your beneficiary is anyone else, then they will generally owe income
taxes when the assets move to them, but no penalty. |
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32. Q: Does a normal high deductible
($5000)medical insurance policy (Blue Cross Blue Shield of Georgia)
qualify as a HSA policy. |
Insider: Please
see the question and answer to "Do I have a HSA qualified health
insurance plan?" |
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33. Q: Do you have anything that
itemizes the recent clarifications released? |
Insider: Check
the latest issue (Vol. 10) of the HSA Insider (go to the
www.hsainsider.com home page and scroll down) and you will find the
latest Treasury guidance summarized with links to the entire
documents. We also have a U.S. Treasury button on the left side of
the home page of this web site which will bring you to a section of
the site with all the recent U.S. Treasury documents. |
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34. Q: What accountability is required
for how the money in the HSA is spent. i.e. If I spend $1200 on
prescriptions using my American Express card can I then reimburse
myself from the HSA? Is the administrator responsible to ensure all
expenses are valid? |
Insider: The
administrator is not responsible for what someone with an HSA spends
the funds on, the HSA holder is the one responsible. Yes, you can
re-imburse yourself. |
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35. Q: I'm retired, age 63, spouse 60,
current health ins. is BlueCross PPO with $5,000 deductible (per
person). Main question is: can we set up one of the new HSA accounts
for 2004 and put aside pre-tax dollars event though we have no
"earned income"? Our income consists of my Soc.Sec. benefit plus
interest from various investments. I guess our concern is if you
must have "earned income" and secondly if our current Blue Cross
PPO/%5,000 deductible primary health policy qualifies. Our current
health is probably not good enough to quality for a new health
insurance policy. Would appreciate your advise.
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Insider: You
can open an HSA if you do not have "earned income," (and you do not
need to itemize either) but you must have a HSA qualified health
insurance policy to open an HSA. To find out if you have an HSA
qualified health insurance policy, go to the question "Do I have a
HSA qualified policy?" in the Q & A Section of this web site. You
can find it faster if you select, display question only at the top
of the Q & A page. |
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36. Q: If I choose not to be covered
under my spouse's plan at work and I carry my own insurance policy,
can I still qualify for an HSA? |
Insider: Yes,
provided you buy an HSA qualified health insurance plan. To find out
what kind of plan that is, please see the question (and answer) to
"Do I have a HSA qualified health insurance plan?" |
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37. Q: Can I open an HSA for a
dependent who is not a child? |
Insider: There
is no HSA restriction with regard to this question. There may be
state restrictions, but the best way to find out if an HSA is
available in this regard is to call those insurers in your states
offering HSAs. |
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38. Q: I have Blue cross Blue Sheild
Individual policy with family dedcutible of $4500. My insurance
agent says It doesn't qualify for HSA Since it has prescription card
benefit. But is it true? |
Insider: Your
plan may qualify.
The U.S. Department of the Treasury has recently stated that those
with a health insurance plan that is in all other respects HSA
compatible, except that it provides prescription drug coverage below
the deductible, then until 1/1/2006, such persons can have an HSA.
This is how the U.S. Department of Treasury’s media release
described this recent Treasury ruling:
http://www.hsainsider.com/treasury/treasury_7.pdf
INTERACTION OF HDHP BENEFITS WITH PRESCRIPTION BENEFITS AND
TRANSITIONAL RELIEF Prior guidance noted that an eligible individual
must be covered by an HDHP and generally no other health plan that
is not an HDHP. Guidance issued today clarifies that individuals
covered by a health plan that provides prescription drug benefits
before the minimum annual deductible of an HDHP has been satisfied
may not make contributions to an HSA. However, companion guidance
also issued provides transition relief to those individuals covered
by both an HDHP and by a separate health plan or rider that provides
prescription drug benefits before the deductible of the HDHP is
satisfied. Under the relief, such individuals continue to be
eligible to contribute to HSAs before 2006.
If you want to read the full text of the Ruling, go to:
http://www.hsainsider.com/treasury/treasury_3.pdf
To find out if your $4,500 family deductible plan qualifies, go to
the question Do I have an HSA qualified health insurance plan in the
Q & A section of this web site. If you select list questions only,
you will be able to find it faster.
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39. Q: HDHP
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Insider: High
Deductible Health Plan (sorry for the health care speak) |
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HSA Basics provided by www.HSAInsider.Com
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