HSA Frequently Asked Questions
Q. What is a Health Savings Account?
A.
An HSA works like an IRA, except that money is used to pay health
care costs. Participants enroll in a relatively inexpensive high deductible
insurance plan. Then, a tax-deductible savings account may be opened to
cover current and future medical expenses. The money deposited, as well as
the earnings, are not taxable. The funds can then be withdrawn to cover
qualified medical expenses tax-free. Unused balances roll over from year to
year.
Q. Who can qualify?
A. Everyone (not just self-employed or small businesses) with a
qualified high deductible insurance plan is eligible for a tax-deductible
HSA.
Q. How much does a HSA High Deductible
Plan Cost?
A.. Please complete our
quote form for a personal quote.
Q. What is the difference between a Medical Savings Account and a
Health Savings Account?
A. HSA's are a significant expansion of the current MSA program.
Unlike MSAs,
HSA's provide the following:
- Everyone with a qualified high deductible plan is eligible to participate (includes all size employers, the self-employed, individual and families who are not self-employed)
- HSAs can be funded by the employer, employee or combination of both within the same calendar year
- HSAs are permanent and portable
- Larger tax-deferred contributions to custodial accounts
- There are broader deductible ranges
Q. What is a high deductible insurance plan?
A. A high deductible insurance plan is a health plan with a minimum
deductible of $1,100 for self-only coverage and $2,200 for family coverage.
The maximum out-of-pocket expenses for allowed costs must be no more than
$5,500 for self-only coverage and no more than $11,000 for family.
Q. Does the HSA law allow for higher deductibles than MSAs?
A. Yes. The new deductibles available May 1, 2004 are: individual;
$1,000, $1,500, $2,050, $2,550 $4,950 family; $2,000, $3,000, $4,100,
$5,100, $9,900
Q. Can a Medical Savings Account be rolled into a Health Savings
Account?
A. Yes. MSAs can be rolled into HSAs on a tax-free basis, but it is
not necessary. If, however, you choose to participate in the new HSA
contribution limits and deductibles at this time, complete an HSA Adoption
Agreement.
Q. Can MSA in force business participate in the new HSA program (i.e.
expand the contribution amounts)?
A. Yes. You can participate in the new HSA program as long as you
complete the new HSA Adoption Agreement. MSA clients may retain their
current deductible, coinsurance limits and contribution amounts, if they
choose. (See question above.)
Q. What are the new maximum contribution limits?
A. Annual
contributions for 2007 are capped at either the high deductible of $2,850
for an individual and $5,650 for a family – whichever amount is less. The
annual maximum HSA contribution will change each January 1st based on the
Consumer Price Index (CPI). There are no maximum limits on the account
accumulation.
- The legislation provides for an additional contribution (and tax deduction) for those who turn age 55 before the end of the tax year. The additional contribution amount is $700 for 2006 and increases annually to an additional $1,000 in 2009. If you had HDHP coverage for the full year, you can make the full catch-up contribution regardless of when your 55th birthday falls during the year. If you did not have HDHP coverage for the full year, you must pro-rate your "catch-up" contribution for the number of full months you were "eligible", i.e., had HDHP coverage. A month is “counted” if your are 55 or older on the first day of that month.
- If both spouses are eligible individuals and both spouses have established an HSA in their name and turn 55, then both can make catch-up contributions. If only one spouse has an HSA in their name, only that spouse can make a "catch-up" contribution.
Contributions may be made by anyone on behalf of the account beneficiary.
Q. Does the account need to be funded before year-end?
A. You have until the tax-filing deadline of the following year to
make a contribution for the previous tax year.
Q. Is there an age at which an individual must withdraw his/her
money from an HSA?
A. With an IRA or 401K once the person reaches 70 1/2 they are
required to make withdrawals from the money in these tax deferred accounts.
That is not the case with HSAs. There is no requirement that withdrawals
from an HSA begin at 70 1/2 as there is with IRAs and 401Ks.
Q. Is the HSA contribution prorated for the year?
A. Yes, if your plan isn't effective for the entire calendar year, only
the pro-rated portion of the maximum may be contributed and deducted. For
example, if your plan is effective February 1st, you could contribute 11/12
of the maximum contribution limit.
Q. Are the plan designs the same?
A. a) Q: Is the family deductible an aggregate?
A: Yes.
b) Q: Are any first-dollar benefits allowed?
A: First-dollar benefits are only allowed for preventative care.
c) Q: Do Rx claims apply toward the plan deductible?
A: Yes, as we provide Rx coverage.
Q. Does the maximum Out-Of-Pocket expense of $5,500 for individuals
and $11,000 for families include the deductible?
A. Yes. Total OOP expenses including the deductible can be no greater
than $5,500 for an individual and $11,000 for a family.
Q: Can a policyholder continue to deposit into an MSA as long as the
insurance plan is a qualified high deductible plan?
A: Yes. MSA policyholders have a lifetime right to their MSA
custodial account under the rules.
Q: Will existing qualified plans continue to have deductibles
increasing annually according to COLA?
A: Yes.
Q: What sets Assurant Health HSA plans apart from the competition?
A: Our reputation speaks for itself. We are an industry leader in the
“medical IRA” business given our leadership position in MSAs. We have one of
the only “feeless and seamless” custodial accounts in the country. Our core
reputation on claim payments was built over a century. We make it simple to
understand and sell and we are ready to assist you today with educational
and point of sale materials.
Q: Is the One Deductible the only HSA compatible plan?
A: Yes. Separate Rx deductibles and copays are not compliant with the
new HSA law.
Q: What happens under the HSA law once someone becomes eligible for
Medicare?
A: Once a person becomes Medicare eligible, he/she can no longer
contribute to an HSA. However, he/she can use the accumulated funds to cover
qualified medical expenses not covered under Medicare or his/her
supplemental plan.
Q: Can minors have a “self-only” HSA?
A: According to the Treasury guidance, minors who are claimed as a
dependent on another person’s tax return are not eligible to have a
“self-only” HSA. They can be covered by their parent’s or guardian’s HSA
plan.
Q: Will all plans with deductibles of $1,000 and up qualify as an HSA
with Assurant Health?
A: Our current “non-One Deductible” plan designs would not qualify
for HSA status due primarily to the separate drug deductible.
Q: Can clients roll their MSA funds into an HSA now, or must they wait
for their renewal date?
A: Yes, clients can roll their funds into an HSA and may increase
their deductible before renewal time.
Q: Does a person buying an HSA need to have “earned” income in order
to deduct the contribution? Can they deduct it against “unearned” income
i.e. pension, investment, etc.
A: An individual who has less earned income (even no earned income)
than his/her HSA contribution may still take the full above-the-line
deduction.
Q: Could a person decide to have his/her HSA custodial account
administered by someone other than Assurant Health?
A: Yes, a client can have a qualified medical plan and decide to have
his/her HSA account with another administrator, such as MSAver. You can
designate this on the agent software by selecting the One Deductible plan
type and selecting “Yes” in the new HSA field and then “MSAver” or “Other”
in the HSA type field.
Q: Is the integrated (common) deductible part of the definition of
high deductible health plan/HSA legislation?
A: No, a “common” deductible is not required. However, no family
member may receive benefits until at least $2,000 has been incurred. Our
plans have a common deductible that is compliant with the HSA law.
Q: Since deposits can be made by anyone on behalf of the account
beneficiary, who can legally take the tax deduction?
A: Contributions made by a family member on behalf of an eligible
individual to an HSA are deductible by the eligible individual in computing
adjusted gross income.
Q: What are the current interest rates on HSAs?
A: Our HSA earns interest at the annual rate of 3% on a minimum
balance of $5,000. An account balance of less than $5,000 but at least $750
will earn interest at the rate of 2%. Interest is compounded quarterly. We
reserve the right to alter the minimum account balance requirements and the
interest rates we pay.
Q: How are HSA qualified medical expenses paid?
A: On the HSA Adoption Agreement, clients choose whether they prefer
a manual or an automated disbursement. As long as there is money in their
HSA, the automated disbursement occurs regardless of whether the deductible
has been met. If the client just wants the disbursement to be distributed
without a lot of intervention on his/her part, then automated disbursement
may be the better choice. Otherwise, if the client wants a tighter control
on the funds, then the manual disbursement may be the way to go. Either way,
checks will be sent to the client, not the provider.
Q: Are health insurance premiums considered a qualified medical
expense?
A: Health insurance premiums are not qualified eligible expenses
except for the following scenarios: qualified long term care insurance,
COBRA and health care coverage while receiving unemployment compensation.
Funds can also be used to pay for Medicare Part A or B premiums (not
Medicare supplement premiums).
Q: Who can deduct premium payments from their taxes?
A: Today, the self-employed can deduct their premiums. We are working
with Congress to pass legislation that will allow everyone to deduct 100% of
their premium payments. Until such legislation is passed, only the
self-employed can deduct any portion of their premium payments.
Q: Where should completed HSA Adoption Agreements be sent?
A: Completed Adoption Agreement should be sent to.. call 1-877-800-7340
Q: What does “first-dollar benefits, except for wellness” mean?
A: A high deductible health plan may still be federally qualified if
it does not apply the deductible to preventive care benefits. State mandated
wellness benefits are considered preventive care benefits. If your state
does not have a wellness mandate, benefits are paid subject to deductible
and coinsurance.
Q: What is the timing of disbursements relative to an incurred medical
expense?
A: Federal law places no restriction on when disbursements must
occur. We offer feeless/seamless administration of the client’s account and
the client can expect prompt disbursements of qualified medical expenses.
Disbursements of $100 or more are issued on a monthly basis. Checks will be
issued quarterly for requests that total less than $100. A claim total that
is less than $10 will be addressed at year-end.
Q: If a client files an extension on his/her taxes, would he/she have
extra time to contribute money into his/her HSA custodial account?
A: The client could contribute until the tax filing deadline. An
extension does not affect the amount that a client can contribute to the
HSA.
Q: How much can a client contribute to an HSA account if he/she
changes the plan deductible mid-year?
A: If a client changes his/her deductible mid-year, his/her
contribution will be pro-rated based on the new deductible. For example, if
your client changes the deductible from $2,000 to $5,000 in June, his/her
contribution is 6/12 of $2,000 ($1,000) plus 6/12 of $5,000 ($2,500), for a
total of $3,500 for the year.
Q: Can clients roll funds from an IRA, HRA or FSA into an HSA?
A: Rollovers from an IRA, HRA or FSA are not permitted.
Q: Can clients roll funds from an HSA into another investment vehicle,
such as an IRA, HRA or FSA?
A: No.
Q: If an unmarried insured has single coverage, can HSA funds be used
to pay for qualified medical expenses for his/her dependents?
A: Yes.
New Treasury Department Rulings
Q: How are wellness benefits handled under an HSA plan?
A: There is no legal requirement for a high deductible health plan (HDHP)
to provide benefits for preventive care or to cover these services before
the minimum deductible is reached. We will continue to offer coverage for
preventive care subject to deductible and coinsurance unless state mandated.
This is similar to our other plans.
Q: How are prescription drug benefits handled under an HSA plan?
A: Prescription drugs are subject to the health plan’s deductible and
coinsurance. Under the HSA legislation, individuals with an HDHP are not
allowed to have prescription drug coverage that has no deductible or has a
deductible that is lower than the minimum deductible required for an HDHP.
However, individuals participating in an HSA who also have prescription drug
coverage under a separate insurance plan or rider that does not meet the
HDHP requirements may continue to be eligible for an HSA until January 1,
2006. We do not offer separate prescription drug coverage.
Q: Can medical expenses incurred before the HSA was established be
paid from the HSA?
A: Individuals who establish an HSA on or before April 15, 2005 can
use the HSA to reimburse qualified medical expenses incurred on or after the
later of: 1) January 1, 2004; or 2) the first day of the first month that
they are covered under an HDHP. For HSAs established after April 15, 2005,
medical expenses may not be paid from an HSA if the expenses were incurred
before the HSA was established.
Assurant Health and its affiliates are not engaged in rendering tax, investment or legal advice. Federal and state tax regulations are subject to change. If tax, investment or legal advice is required, seek the services of a licensed professional. Insurance products are underwritten and issued by Fortis Insurance Company, John Alden Life Insurance Company and Fortis Benefits Insurance Company.
Contact
For more information about High Deductible Health's plans, please call 612-991-3546 or 1-877-800-7340.