QA: Health Savings Accounts

Dean Health Plan offers High Deductible Health Plans (HDHPs) that are compatible with a Health Savings Account (HSA). With the HDHP option, you have the ability and freedom to select where you would like to set up your HSA account. Dean Health Plan does not contract with or recommend any HSA custodian. Contact a trusted bank or financial institution for more information about setting up an HSA account.

What is a Health Savings Account (HSA)?

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. Visit the IRS website (irs.gov) for detailed information about HSAs.

Who is eligible to open or contribute to an HSA?

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 an HDHP
Enrolled in Medicare benefits
Claimed as a dependent on another’s tax return

What is a qualified high deductible health plan?

A qualified HDHP:

Provides coverage for medical expenses.
Has in-network deductible and maximum out-of-pocket amounts within the annual IRS guidelines.
Does not pay any medical expenses (other than preventive) until the deductible is satisfied.

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

The HSA can be used for qualified medical expenses, as defined by the IRS in section 213(d) of the Internal Revenue Code.

When does eligibility for an HSA begin and end?

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. 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. Although an existing HSA can be used 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.

Where do I establish an HSA?

You can establish an HSA with trustees or custodians. Typically, these are banks or other financial institutions.

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?

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.

How much can be contributed to an HSA?

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.

Are there any restrictions with a qualified HDHP?

Prescription Drug: Federal law requires both prescription drug and medical costs to accumulate toward your plan deductible. This means you must pay 100 percent of your medical and prescription drug costs until the plan deductible is met. Once the plan deductible is met, prescription drug benefits will pay according to your plan design.
Family Deductible: When two or more are insured under a qualified HDHP, federal law requires the full family deductible to be satisfied before benefits can be paid. This means one person may be required to satisfy the full family deductible. However, some HDHP plans are not subject to this restriction. If the HDHP offers a single deductible greater than the IRS qualified HDHP minimum family deductible (e.g., $3,000), benefits can be paid to any person on the policy that has satisfied the single deductible. For additional details, see the IRS website or contact our sales team.