What is an HSA?

The Health Savings Account (HSA) is an Internal Revenue Service (IRS) tax-exempt medical savings account for employees enrolled in a high deductible health plan. HSAs funds can be used for qualified health care expenses like doctor visits, lab and diagnostic tests, dental procedures, vision exams and must more.  IRS Publication 502 at www.irs.gov provides a listing of qualified health care expenses. 

Who is eligible for the HSA?

The IRS has specific eligibility rules for Health Savings Accounts which may make you ineligible.  In addition to requiring that participants be enrolled in a high deductible health plan (e.g., the CD PPO HDHP qualifies as a high deductible health plan), if any of the following apply, you are not eligible for an Health Savings A:ccount. Refer to the Health Reimbursement Arrangement for CD PPO HDHP participants.

1. You are covered by another health plan that is not a high deductible health plan.

2. You are enrolled in Medicare, Tricare, Tribal or any other similar plan.

3. You are claimed as a dependent on another person's tax return, you are not eligible for an HSA.

HSA - Custodial Agreement and Disclosure Statement

HSA - Designation of Representative by Accountholder

If one of the above applies, refer to the Health Reimbursement Arrangement for CD PPO HDHP participants. 

More About HSAs

• Portability

  • The HSA is a bank account established and owned by the participant. It is considered "portable" because if you leave employment, the bank account still belongs to you.

• Contributions

  • The HSA bank account allows for contributions by PEBP and by the employee. Employee contributions may be started, stopped, increased or decreased by the employee at any time during the year.  Annual maximum contribution limits are set by the IRS.

• Flexible Spending Account Access

  • The IRS restricts the use of Flexible Spending Accounts with the HSA plan. Employees with an HSA can enroll in the "Limited-Purpose" Flexible Spending Account (LPFSA) for dental and vision expenses only. The LPFSA works the same way a standard Health Care Flexible Spending Account does: pre-tax, "use it or lose it" elections and expenses must occur within the plan year. The difference is the LPFSA limits what expenses are eligible for reimbursement. LPFSA funds can only be used to reimburse claims for eligible vision and dental expenses. (Remember: Cosmetic procedures such as teeth bleaching are not eligible under any Flexible Spending Accounts.) To learn more about the LPFSA, visit www.asiflex.com.

Contribution Limits and IRS Requirements

Each year the IRS establishes limits for HSA contributions, along with the minimum deductible and maximum out-of-pocket expenses for high deductible health plans.  Eligible HSA employees receive a PEBP contribution which must be counted toward the calendar year 2012 contribution limit.

2012 Maximum Contribution Limit
	Individual (Participant Only Coverage)	Family (two or more individuals)
The maximum shown is for eligible HSA individuals with high deductible health coverage through December 31, 2012	$3,100	$6,2502

¹The total 2012 contributions (combined employee and PEBP) cannot exceed the limits shown above.

 ²The Family maximum applies when two employees (employee and spouse) are eligible for the HSA.  For example, if one employee covers a dependent and the other employee is covered as self-only, the maximum for the entire family is still $6,250; therefore, the total combined contributions between both employees and PEBP’s contribution cannot exceed $6,250.) 

Note: If an employee is covering a dependent and that dependent has other coverage that is not considered a high deductible health plan, the maximum contribution allowed by IRS for the employee is based on an Individual or $3,100.


Catch-Up Provisions

Individuals (and their spouses covered on the CD PPO HDHP) who have attained age 55 (and who are also not enrolled in Medicare) may contribute an additional $1,000 to their HSA.  After an individual has enrolled in Medicare (generally at age 65), contributions, including catch-up contributions are no longer permitted to be made to an HSA.

Examples of Prorating Contributions

Prorating is required to avoid tax penalties when an individual does not maintain HSA-compatible healthcare coverage (a high deductible health plan) through December 31st.

¹The total 2012 calendar year contributions (combined employee and PEBP) cannot exceed the limits shown above.

Mid-year Changes

If your CD PPO HDHP coverage begins in July of a given year, you are eligible to contribute the maximum amount for that year provided that you maintain coverage until December 31st of the following year.

If you begin the year with family coverage and switch to single coverage in July of that year, you are eligible to contribute half of the family coverage contribution maximum and half of the individual coverage maximum.

Eligible Medical Expenses

An eligible medical expense is an expense that pays for healthcare services, certain medical equipment, medications, dental care services, and vision care services as described in IRS Publication 502 (available at www.irs.gov) or view HealthScope Benefits' Health Care Expense Table.  Payments of premiums to PEBP is not considered an eligible medical expense.

Things to Keep In Mind

HSA funds used to pay for qualified medical expenses are always tax-free, regardless of age or HSA-compatible health plan coverage. Prior to age 65, funds used to pay for non-eligible medical expenses are subject to normal income tax and a 20% penalty.  After age 65, HSA funds may be withdrawn for non-eligible expenses with no penalty, but regular income tax will apply.

HSA funds may be used to reimburse yourself for past medical expenses if the expense was incurred after your HSA was established. If you have questions regarding the eligibility of a specific expense, you should consult a qualified-tax advisor or the IRS.

Consumer Tips

Health Savings Accounts encourage increased involvement in consumer healthcare and treatment options. The idea of becoming a healthcare consumer is new to many of us, but tools are available to help with expense planning. For example, the following websites provide cost estimators that can help you determine fair healthcare prices in your specific geographic area. Plus, Catalyst Rx offers a free drug pricing tool for CD PPO HDHP members to price and compare medications:

• Catalyst Rx Drug Pricing Tool

• Healthcare Blue Book

• Fair Consumer Price Look-Up

IRS Resources

The IRS provides a series of resources, publications and notices to assist in understanding how an HSA is funded and utilized in different situations.  To view the publications, please visit www.irs.gov. To learn more about HSAs and other tax-favored accounts for health plans, view Publication 969

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