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Health Savings Accounts (HSA)

Q. What is a Health Savings Account (HSA)?

A. The health savings account, or HSA, was created by federal legislation in 2003 and allows an individual to set aside pre-tax dollars for qualified medical expenses. The funds can roll over from year to year and you can also take them with you when you change jobs.

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Q. Who is eligible to open or contribute to an HSA?

A. To be eligible to open or contribute to an HSA, by law you must be enrolled in a federally qualified high-deductible health plan (HDHP).

You cannot be:

  • Covered by any health plan other than a high-deductible health plan (certain plans such as dental and vision plans are not included in this restriction)
  • Enrolled in Medicare benefits
  • Claimed as a dependent on another individual’s tax return.

Please contact Dean Health Plan Sales (608) 827-4123 if you have any questions about your eligibility for a high deductible health plan.

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Q. What is a qualified high deductible health plan?

A. A qualified high deductible health plan is a plan that:

  • Provides coverage for medical expenses.
  • Has an annual deductible of at least $1,150 for single coverage and $2,300 for family coverage.
  • Does not pay any medical expenses (other than preventive care), including copays, office visits or coinsurance until the deductible is satisfied.
  • Has a maximum out-of-pocket expenses of $6,350 for single and $12,700 in 2014 for family coverage (indexed yearly for inflation by the IRS), except for out-of-network claims.

Dean Health Plan’s Individual Plans are designed to be compatible with HSAs are labeled HDHP.

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Q. What can the HSA be used for on a tax-preferred basis?

A. The HSA can be used for “qualified medical expenses,” as defined by the IRS in section 213(d) of the Internal Revenue Code. Broadly speaking, these are healthcare expenses for the prevention and treatment of health conditions, including dental and vision expenses. They exclude services that are cosmetic in nature. In addition, you can use the HSA to pay for certain types of health insurance premiums, including:

  • Qualified long-term care insurance
  • COBRA healthcare continuation insurance
  • Healthcare coverage while receiving unemployment compensation
  • If you are over 65, premiums for Medicare Parts A and B, a Medicare HMO, or your share of employer-sponsored health insurance.

However, premiums for Medicare supplemental (Medigap) policies are not qualified expenses.
You cannot use the HSA to pay for services already reimbursed elsewhere, such as through your health plan. In other words, you could use it to pay for expenses attributable to your deductible or to your portion of any coinsurance, but not for amounts paid by your health plan after the deductible is met.

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Q. When does eligibility for an HSA begin and end?

A. You can establish an HSA on the first day of the month that you have a qualified high deductible health plan and are otherwise an eligible individual. If you obtain an HDHP during the month, you are not eligible to establish or contribute to the HSA until the first day of the following month. You lose eligibility to establish or contribute to an HSA if you become covered by a health plan other than an HDHP, become enrolled in Medicare, or become a dependent on another individual’s tax return. However, losing eligibility does not necessarily mean you lose your HSA, if already established. You can keep the HSA and continue to use the funds on a tax-preferred basis for qualified medical expenses. You cannot contribute to the HSA or establish other HSAs unless you become an eligible individual again.

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Q. Where do I establish an HSA?

A. You establish an HSA with trustees or custodians. Typically, these are banks or other financial institutions and there are a number of them that currently offer HSAs. Please contact your local financial institution for additional information.

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Q. Whose responsibility is it to ensure that I am eligible for an HSA, to monitor the contribution limits, and to use the funds for qualified medical expenses?

A. As the taxpayer, you are responsible. Neither the health plan nor the HSA trustee or custodian has any obligation to verify that you are using your HSA in accordance with the law. A complete list of qualified expenses is located at the IRS Website.

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Q. How much can be contributed to an HSA?

A. The maximum amount you may contribute to your HSA each calendar year is set by the IRS. The contribution amounts set by the Treasury Department are adjusted annually and can be found at the US Treasury Website.

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Q. Are there any restrictions with a qualified HDHP?

Prescription Drug Rider
With a qualified High Deductible Health Plan (HDHP), as required by federal law, both your prescription drug costs and your medical costs will accumulate toward your plan deductible. This means you must pay 100 percent of your medical costs and prescription drug costs (even if you purchased the Prescription Drug Rider) until the plan deductible is met. Once the plan deductible is met, we will pay your prescription drug benefits according to the rider option you’ve selected.

Family Deductible
With a qualified High Deductible Health Plan (HDHP), policies with two or more insured require the family deductible to be satisfied in full before Dean Health Plan will pay benefits. This means one person can satisfy the full family deductible.

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