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Health Savings Plans

HSA Frequently Asked Questions
 

 

 

 

 

 

 

 

  Who may contribute to an HSA?

 

  If my client has already established an MSA, can they continue to make contributions to it?
 
 
What is an HSA?
Health Savings Accounts (HSAs) are tax-advantaged personal savings accounts that may be established in combination with HSA eligible high-deductible health plans. HSAs were approved with the passage of the Medicare Prescription Drug, Improvement and Modernization Act of December 31, 2003.
 
HSAs are available to all market segments, including individual and family plans, and small, midsize and large groups. Almost everyone with an HSA-eligible high-deductible health plan can get an HSA.
 
Funds in HSAs may be accumulated over the years and may be distributed on a tax-free basis to pay for, or reimburse, qualified medical expenses. The remaining covered medical expenses are then paid as indicated by the has-eligible high-deductible health plan.
 
Clients should be advised to contact their financial or tax advisors for more detailed information on HSAs, including information about how to establish a new HSA or how to replace an existing MSA.
 
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Who can establish an HSA?
Individuals or eligible employees can establish an HSA if they:

  are covered by an HSA-eligible high-deductible health plan on the first day of the month that they establish the HSA.

  could not be eligible for Medicare benefits but do not have Medicare coverage

  are not listed as a dependent on another individual's tax return.
 
Individuals or eligible employees cannot establish an HSA if they are covered by a a health plan that doesn't qualify as an HSA-eligible high-deductible health plan, except for permitted insurance.
 
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Where can my clients purchase an HSA?
Blue Shield has carefully researched and selected Wells Fargo as the preferred vendor to administer and manage HSAs for our members with HSA-eligible high-deductible health plans. This also provides you with even more sales opportunities. HSAs are also available from other financial institutions.
 
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What advantages do HSAs have over Medical Savings Accounts (MSAs)?

 
HSAs are portable.

 
HSA-eligible high-deductible health plans have lower deductible requirements and higher out-of-pocket limits than MSAs, making the accounts more flexible and accessible than MSAs.

 
HSAs, unlike MSAs, may be offered as part of an employer's "cafeteria" plan.

 
HSA tax-deductible contribution limits are greater than those for MSAs.

 
An employer and employee are both permitted to contribute to an HSA in the same year (unlike MSAs where either the employer or employee may make contributions in the same year, but not both).

 
"Catch-up" contributions are allowed for HSAs for people between the ages of 55 and 65 (starting at $500 per year in 2004).
 
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What is an HSA-eligible high-deductible health plan?
To qualify as an HSA-eligible high-deductible health plan a plan must satisfy certain requirements with respect to deductibles and out-of-pocket maximums. See the table below for specific requirements.
 
Individual or Family  Deductible  Annual Out-Of-Pocket Maximum1
 Individual  At least $1,000  Not to exceed $5,000
 Family  At least $2,000 (Deductible applied to the family as a whole - family must incur covered medical expenses in excess of $2,000, or minimum family deductible if higher, before plan benefits are paid to any member of the family)  Not to exceed $10,000
 
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Which Blue Shield IFP plans are HSA-compatible?
The Shield Spectrum PPO Savings Plan 2400 for individuals and the Shield Spectrum PPO Savings Plan 4800 for families are HSA-compatible.
 
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Are HSAs and high-deductible health plans the same?
No. Health insurance companies provide high-deductible health plans. HSAs are offered through financial institutions. Consumers who enroll in an HSA-eligible high-deductible health plan may be eligible to open an HSA. Clients should consult with a financial advisor to determine if they meet HSA-eligibility criteria and whether or not an HSA and a high-deductible health plan is a good fit for them financially.
 
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Who may contribute to an HSA?
HSAs are open to almost everyone with an HSA-eligible high-deductible health plan. Eligible and qualified individuals, employees and employers may contribute to an HSA. In addition, contributions can be made by others on behalf of the individual covered by the HSA-eligible high-deductible health plan with the contributions deductible by the covered individual (May 15, 2004, Treasury Guideline).
 
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What are the limits for contribution to HSAs?
According to the Treasury/IRS guideline dated May 15, 2004, "Annual HSA contribution limits in 2004 are the lesser of: 

 
100% of the deductible amount on the accompanying high-deductible health plan; or

 
$2,600 for self-only accounts and $5,150 for family accounts (these dollar amounts will be indexed for inflation in future years)."
 
The amount is also reduced by any contribution to an existing Archer MSA.
 
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If my client has already established an MSA, can they continue to make contributions to it?
Yes. Contributions to MSAs and qualified disbursements from existing accounts are still permitted as long as the member is covered by an HSA-eligible high-deductible health plan.
 
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1  Includes deductibles, copayments and other amounts, but not premiums; plan's out-of-pocket maximum for out-of-network services is not taken into account in determining annual contribution limit.


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Copyright © 2005 Oleg Skurskiy Authorized Independent Agent, CA License 0E50389