Frequently Asked Question for High Deductible Health Plans, Health Savings Accounts, and Health Reimbursement Arrangements
Thank your for your interest in learning more about the new health plan option introduced in 2005-the High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA). Each health plan has unique features. For complete details refer to the individual plan brochure, available on the Federal Employees Health Benefits Program (FEHB) website.
For a quick comparison chart showing the differences between an HSA, an HRA, and a Health Care Flexible Spending Account (HCFSA), select this link: Comparison Chart for HSA, HRA and HCFSA
To view all plans available in your area, clink this link: OPM Tool to Compare Plans by ZIP Code
Please select one of the items below to see questions related to that area:
High Deductible Health Plans (HDHP)
Health Savings Accounts (HSA)
Limited Expense Health Care Flexible Spending Accounts (LEXHCFSA)
Health Reimbursement Arrangements (HRA)
Questions Relating to HDHP, HSA, HRA and Health Care Flexible Spending Account (HCFSA)
Questions Relating to Retirees and Military Veterans
High Deductible Health Plans (HDHP)
What is a High Deductible Health
Plan?
A High Deductible Health Plan (HDHP) is a new health plan product, when combined with a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA), provides insurance coverage and a tax-advantaged way to help save for future medical expenses.
The HDHP/HSA or HRA gives you greater flexibility and discretion over how you use your health care dollars.
What are the general features
of an HDHP?
HDHPs have a higher annual deductible than traditional health plans. For 2008, an HDHP in the FEHB Program has a minimum annual deductible of $1,100 for Self Only coverage and $2,200 for Self and Family coverage (the deductible amount is indexed every year).
HDHPs in the FEHB Program have annual out-of-pocket limits which do not exceed $5,600 for Self coverage and $11,200 for Self and Family coverage.
Service delivery in the HDHP program within the FEHB Program may be offered with a: Preferred Provider Organization (PPO), Health Maintenance Organization (HMO), or Point of Service (POS).
The health plan determines eligibility for a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA).
Depending on the HDHP you elect, you may have the choice of using either in-network and out-of-network providers. Using in-network providers will save you money. With the exception of preventive care, the annual deductible must be met before the plan benefits are paid.
Preventive care services are generally paid as first dollar coverage, after a small deductible, or co-payment. Or, a maximum dollar limit (up to $300 for instance) may apply.
Who would benefit from changing to such a plan, and why? And, who would NOT benefit from such a plan and why?
If your medical expenses are generally limited to preventive care, you should definitely consider an HDHP, especially if you also have the ability to make additional voluntary contributions to your HSA to accelerate the accumulation of funds for future medical expenses. If your in-network medical expenses would trigger the catastrophic limit, you may also want to consider an HDHP, if the nature of those expenses is such that you continue to pay out-of-pocket costs in your traditional plan even after you hit your traditional plan's lower catastrophic limit. This can happen because traditional plans may exclude drug and other costs from their catastrophic limits but an HDHP cannot. With an HDHP, once you hit the catastrophic limit, there is no out-of-pocket expense for covered in-network services. If you have significant medical expenses that do not approach catastrophic limits, you are probably better off in a traditional plan.
In addition, there are a number of steps FEHB members should take to assist them in making an informed decision as to whether or not an HDHP/HSA or HRA is the right health program option for them.
Determine the premium you would pay out of your pay check,
Review the plan design elements: deductible, out-of-pocket limits, the amount the plan contributes to your HSA, known as the "premium pass through," or the amount the plan credits to your HRA,
Subtract the annual plan contributions from the annual plan deductible to determine your true out-of-pocket cost,
Review the eligibility considerations for an HSA. If you are not eligible for an HSA would you accept an HRA?
Ask yourself if you are in a financial position to be able to pay the annual deductible amount required (depending on Self Only deductible or Self and Family deductible) should you or a family member require a high medical cost service in the early months of the plan year,
Determine if your financial resources allow you to make additional tax-deductible voluntary contributions
If you are between the ages of 55 and 65, determine whether or not your financial situation will allow you to make "catch up contributions". Select this link for more information on "catch up contributions,"
Review the listing of the new health care plans available where you live or work, at OPM Tool to Compare Plans by ZIP Code .
How much less expensive are the HDHP premiums?
The premiums are similar to the premiums for many plans' standard option but the plan contributes some money from the premium, the "premium pass through," to your HSA. For exact premium amounts you must contact the individual plans offering the HDHP option. Please visit: OPM Tool to Compare Plans by ZIP Code .
Explain what this means: "HDHPs have annual out-of-pocket limits which do not exceed $5,250 for Self Only coverage and $10,500 for Self and Family coverage"?
When you are enrolled in an HDHP, you will not have to pay more than the plan's annual catastrophic limit of no more than $5,250 for in-network Self Only coverage and $10,500 for in-network Self and Family coverage, including the deductible; some non-HDHP plans have a lower catastrophic limit. It is important to remember once the catastrophic limit is met, you will not incur additional out-of-pocket covered medical expenses, including doctor visit co-payments and prescriptions which may be excluded from a traditional plan's catastrophic limit.
Is an HDHP separate from the current FEHB plans?
No, the HDHP is offered through the FEHB Program.
Are FEHB carriers offering an indemnity-type HDHP instead of only PPO, HMO, or POS?
GEHA and Mail Handlers are nation-wide indemnity type plans will offering an HDHP with both in-network and out-of-network benefits.
What is the main financial risk (i.e. If you have an expensive year medically, how much will it cost you under plan x, or plan y)?
Your out-of-pocket expenses for covered medical services are limited to the catastrophic in-network limit of $5,250 for Self Only coverage and $10,500 for Self and Family coverage. It is important to remember once the catastrophic limit is met, you will not incur additional out-of-pocket covered medical expenses, including doctor visit co-payments and prescriptions.
HDHP: Obtaining Information
When will the HDHP carriers be available to receive employee telephone calls?
The FEHB carriers offering an HDHP product will respond to questions about their HDHP beginning no later than the beginning date of Open Season.
Is there a Savings Calculator available so we can enter our personal information and compare the costs/benefits of the High Deductible Health Plan/HSA to a Flexible Spending Account (FSA)?
Some FEHB health plans offering an HDHP have a calculator on their website. It is important to remember that an HDHP is another option offered by some health plans.
Which health plans are offering an HDHP (which includes an HSA or an HRA) and how do I contact them?
You can find a list of HDHP plans along with other plan options available in your area at this site: OPM Tool to Compare Plans by ZIP Code
Health Savings Accounts (HSA): The Basics
What is a Health Savings Account?
An HSA is a tax-sheltered trust account you own for the purpose of paying qualified medical expenses for yourself, your spouse, and your dependents. When you enroll in an HDHP, the health plan determines whether you are eligible for a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) based on the information you provide.
What are the general features of an HSA?
- Your own HSA voluntary contributions are tax-deductible.Your own HSA contributions are either tax-deductible or pre-tax (if made by payroll deduction). See IRS Publication 969
 .
- Interest earned on your account is tax-free
- Tax-free withdrawals may be made for qualified medical expenses
- Unused funds and interest are carried over, without limit, from year to year
- You own the HSA and it is yours to keep - even when you change plans or retire
- Your HSA is administered by a trustee/custodian
How will an HSA plan save me money?
An HSA plan may save you money through lower premiums, tax savings, and money deposited in your account which can be used to pay your deductible and other out-of-pocket medical expenses in the current year or in the future.
What is a qualified medical expense?
Generally qualified medical expenses will be determined by the plan in conformance with FEHB law and Section 213. See IRS Publication 502 for a list of qualified medical expenses which also includes over-the-counter drugs. Please note some insurance premiums cannot be paid for by HSA funds.
Please clarify with examples: "Tax-free withdrawals for qualified medical expenses."
The IRS defines qualified medical expenses. See IRS Publication 502 for a list of eligible expenses. However, over-the-counter medicines are considered qualified medical expenses even though they are not stated in the IRS Publication 502. Also, not all insurance premiums are qualified medical expenses even though they are stated in the IRS Publication 502.
Does the money in my HSA earn interest?
Yes. Your HSA funds are invested. Depending on which HSA plan you are enrolled in, the interest rate and payment of interest will vary. Your earnings are tax free.
Can the unused funds in my HSA be rolled over each year?
Yes. Your funds will accumulate without a maximum cap. However, the annual limit you can contribute to the HSA may not exceed the maximum contribution amount set by the IRS , plus "catch up" contributions for those ages 55 to 65.
What happens to my HSA if I leave my health plan or job or switch to a traditional plan?
You own your account, so you keep your HSA, even if you change health plans or leave Federal government. However, if your HSA was fully funded and you leave the HDHP during the year, then you will have to withdraw some of the contribution from the account. You must pay income tax on your excess contributions and income tax on any earnings of the excess contribution. There is no 10% penalty on excess contributions.
If you no longer are enrolled in an HDHP you are not eligible to make contributions to your HSA, but you may request withdrawals for qualified medical expenses.
Are there any fees associated with the Health Savings Account?
Yes, there are administrative fees which vary by plan.
What is the process for setting up an HSA?
First, you must elect a high deductible health plan. Generally, once the plan receives your enrollment, the plan will mail you an information packet which includes banking forms for you to complete and return to the plan. When the plan receives the completed forms, the plan will notify its administrator of the HSA. The HSA administrator will then set up your account and your health plan will deposit "premium pass through" payments into the account.
Does the HDHP decide which company can administer my HSA?
All plans offering an HDHP are required to have a financial trustee who can administer the HSA. However, you can decide which company will administer your HSA and what type of investments you can make with your account once it is established. Any investment allowed for IRAs is allowed for HSAs but you need to verify the financial institution of your choice offers HSAs.
Can my agency's credit union administer my HSA account?
Yes. A Federally chartered credit union qualifies under Treasury Regulations as a trustee/custodian. However, you will need to check with your specific credit union. If your credit union functions as an HSA trustee/custodian, you can work with them in two ways:
Submit your additional voluntary contributions, and
Transfer funds from the trustee/custodian selected by your plan to the credit union.
Where can I invest the money in my HSA?
You can invest the money in your HSA in bank accounts, annuities, certificates of deposits, stocks, bonds, mutual funds, certain types of Bullion or Coins (please see section 408(m)(3) of the IRS Code). However, your HSA custodian or trustee may offer only some of these types of investments.
Is my money safe in this account?
The money market account portion of your HSA is normally insured by a Federal institution (e.g., FDIC, NCUA, etc.) Other types of investments, for instance, stocks, bonds and mutual funds, are subject to normal investment risk.
What are the survivor benefits associated with my HSA?
Your HSA would pass to your surviving spouse or named beneficiary tax free. If you are unmarried and do not have a named beneficiary, the money is disbursed to your estate and is subject to any applicable taxes.
HSA: Contributions
What is the total amount I can contribute to my account (including the plan's premium pass through and my voluntary contributions)?
The IRS sets the maximum contribution limits. These amounts are indexed each year. Please visit this link to view the maximum contribution limits.
If your HDHP was effective on January 1st, the total amount you can contribute to your account is the maximum contribution amount set by the IRS.
If your HDHP is effective after the first day of the month, you may make or receive a full year's contribution to your HSA for partial year coverage as long as you maintain your HDHP enrollment for 12 months. If enrollment is less than 12 months, the tax benefit is lost and a 10% penalty is imposed. There is an exception for death or disability. Previously, enrollees' contributions were pro-rated based on the number of full months their HDHP was in effect.
What is the maximum contribution I can make to my HSA?
First, determine the maximum allowable contribution to your HSA (please see the question above). Second, subtract the amount the plan puts into your HSA through the plan's premium pass through. The remaining amount is what you can voluntarily contribute.
What happens if I contribute more than my maximum allowable contribution?
You may withdraw the excess amount and any earnings on the excess amount prior to April 15th of the following year. However, you must pay income tax on your excess contributions and income tax on any earnings of the excess contribution. There is no 10% penalty on excess contributions.
What happens if I don't withdraw my excess contributions prior to April 15 th of the following year?
You must pay a 6% excise tax on the excess contribution and on any earnings of the excess contribution. If in the next year you decreased your maximum contribution by the amount of your excess contribution made the year before, you do not have to pay the 6% excise tax again. If, however, you leave the excess contribution in, and do not decrease your maximum contribution by the amount of your excess contribution made the year before, you will have to pay the 6% excise tax each year the excess contributions and earnings are in the HSA.
How is the HSA maximum contribution calculated?
By statute, the annual HSA contribution cannot exceed the maximum contribution amount set by the IRS; however, additional contributions, called catch-up contributions, are available to those between the ages of 55 and 65.
What are catch-up contributions?
Catch-up contributions are only available to those between the ages 55 and 65. The chart below indicates the amounts you can contribute to your HSA under catch-up contributions, without being penalized. If you are covered by your HSA for the entire year, you may deposit the entire catch-up amount starting with the year you turn 55. In the year you enroll in Medicare, you must pro-rate your catch-up contribution for the number of months you had your HSA, prior to the month your Medicare enrollment is effective.
Year |
Amount |
2007 |
$800 |
2008 |
$900 |
| 2009+ |
$1,000 |
How do I contribute to my HSA?
You may contribute your own money to your account by making a lump sum contribution or periodic payments at any time, in any amount up to a maximum limit established by the IRS. However, your trustee/custodian can impose minimum deposit and balance requirements. You can claim your total amount contributed for the year as an "above the line" tax deduction when you file your income taxes. Your own HSA contributions are either tax-deductible or pre-tax (if made by payroll deduction). See IRS Publication 969 . You have until April 15 of the following year to make HSA contributions for the prior year. If you are between the ages of 55 and 65, you can make additional catch-up contributions.
Can we make voluntary contributions to the HSA via payroll deduction?
Starting in 2007, many Federal employees who are enrolled in HDHPs became eligible to make pre-tax allotments to their HSAs through The Federal Flexible Benefits Plan (FEDFLEX). For more information select this link. Your own HSA contributions are either tax-deductible or pre-tax (if made by payroll deduction). See IRS Publication 969 .
How much will the plan contribute to my HSA using the "premium pass through"?
The amount each plan contributes to your HSA varies. Please consult the plan's brochure.
"The health plan credits a portion of the health plan premium to the HSA." I do not understand this statement. Would I pay a higher premium than people without an HSA, but part of it goes into the savings account?
The Office of Personnel Management (OPM) and the FEHB carrier have agreed on a premium rate for the HDHP. This premium is comparable in amount to the premium for many plans' standard option. The FEHB carriers will allot a specified portion of the premium to be "passed through" on a monthly basis to the FEHB member's HSA.
Do I have to continue to fund my account each year?
No. You are not required to contribute to your account. However, there may be a minimum balance required to maintain your HSA.
Can I contribute to another person's HSA?
Yes, anyone can contribute to an HSA. However, the tax benefit from such a contribution is gained by the person receiving the contribution, not to the person giving the contribution.
HSA: Coverage
What expenses can I pay for with my HSA?
Your HSA can be used to pay for "qualified medical expenses," as defined by IRS Code 213(d). These expenses include, but are not limited to, medical plan deductibles, diagnostic services covered by your plan, long-term care insurance premiums, and health insurance premiums if you are receiving Federal unemployment compensation, over-the-counter drugs, LASIK surgery and some nursing services. Please note only some insurance premiums are considered "qualified medical expenses."
When you become Medicare enrolled you can use the account to purchase any health insurance other than a Medigap policy. You may not, however, continue to make contributions to your HSA once you are Medicare enrolled.
For the complete list of IRS-allowable expenses, you can request a copy of IRS Publication 502 by calling 1-800-829-3676, or visit the IRS website at www.irs.gov and select "Forms and Publications." Please note, however, while health insurance premiums are listed as an allowable expense they are not reimbursable from HSAs, unless you are receiving Federal unemployment compensation. In addition, over-the-counter drugs, which are not listed, are reimbursable.
Can I use my HSA to pay for non-health-related expenses?
Yes. You may withdraw money from your HSA for items other than qualified health expenses, but it will be subject to income tax and, if you are under 65 years old, an additional 10 percent tax penalty on the amount withdrawn.
If you have an HDHP/HSA and go to the doctor for a visit, not preventive service, on the day the plan coverage begins, are you charged the typical co-payment visit or are you responsible for paying the full doctor charge as if you had no insurance?
You are responsible for the full amount until you meet your deductible, then co-payments and co-insurance apply. If you use a PPO provider, the amount you are charged is limited to the contracted amount the provider agreed to.
Is it true you can use money from your HSA for even non-preferred providers?
Yes, money from your HSA can be used to pay for all qualified medical expenses including over-the-counter drugs. You will usually save money, however, if you use network providers. See IRS Publication 502 for a list of eligible expenses.
I have a Self Only health plan. Will my spouse's otherwise uncovered medical expenses be payable from my HSA, the way they are from my current FSA?
Yes, you may use the money in your HSA to pay your spouse's or other family members' uncovered medical expenses. However, you are not allowed to have both an HSA and a Health Care FSA at the same time.
What happens during the year, while covered under an HDHP/HSA, when one changes from Self Only coverage to Self and Family coverage or vice versa based on a qualified life event?
You will be able to continue contributing to your HSA. The amount you are permitted to contribute will change from the Self Only to Self and Family contribution or vice versa, prorated appropriately for the year.
HSA: Eligibility
Who is eligible for an HSA?
You must participate in a High Deductible Health Plan, have no other insurance coverage other than those specifically allowed, and not be claimed as a dependent on someone else's tax return in order to be eligible for an HSA. Some examples of other coverage that would cause ineligibility are: a health care flexible spending account (HCFSA), a spouse's FSA, a spouse's family enrollment in an HMO, other non-high deductible health insurance coverage, TRICARE, Medicare, or receipt of VA benefits within the previous three months. You can still have other disability, dental, vision and long-term care insurance policies.
Must a participant in a High Deductible Health Plan have no other insurance coverage other than those specifically allowed, and not be claimed as a dependent on someone else's tax return in order to be eligible for an HSA?
Correct. You may, however, join an HDHP and have an HRA while also covered by other health insurance.
If we apply during Open Season, and then find we are not eligible for an HSA, can we cancel?
It is important to review eligibility requirements before you enroll. If you have not used
any benefits or received a plan contribution to your HSA, you may cancel your enrollment no later than 60 days after the effective date of your enrollment, and you may enroll in another plan with a retroactive effective date.
I carry the health insurance for my family, but I file jointly with my husband on my Federal taxes. Does this mean I am not eligible?
You are eligible. Filing jointly as a spouse does not mean you are a dependent on your husband's tax return.
Can I open separate HSA accounts for my minor dependent children?
No, you can not open separate HSA accounts for your minor dependent children.
HSA: Withdrawal
What expenses can I use for my HSA?
You can use the money in your account for qualified medical expenses. See IRS Publication 502 for a full list. Keep in mind over-the-counter medications are also allowable but not listed in Publication 502 and health insurance premiums, which are listed, are generally not reimbursable.
When can I use my HSA?
You can use the money in your HSA immediately, or you can allow the money to accumulate for future use. However, you can only use the amount currently in your account.
Will I have to pay out of my pocket at the time of service?
It depends. Please see the health plan's brochure for specific information about receiving medical care.
How will the HSA be paid out?
It depends on the arrangements your health plan has with its providers. Usually, you can access your account in one of three ways: debit card, check, or withdrawal request.
Is there a minimum reimbursement amount I can request from my HSA?
Yes. Funds will not be disbursed until your reimbursement totals at least $25 or a higher amount based on the rules of the trustee administering the HSA.
Do I have to use my HSA to pay for my annual physical or flu shot?
No. Preventive care is usually covered at 100%, sometimes with a small copay, or up to a maximum dollar amount such as $300.
Can I use my HSA to pay for medical services provided in other countries, such as Mexico and Canada?
Yes.
What if my medical expenses are more than my health savings account?
You will pay any difference between the balance of your HSA and the plan's deductible. Please consult the plan's brochure for more information.
How soon can you withdraw funds from your HSA for medical expenses? For example, if you have surgery in January and need $1,000 for your deductible, are you able to pay the deductible then (as in the case of a health care flexible spending account, HCFSA) or do you have to wait until your account has accumulated $1,000?
You have to wait until $1,000 is accumulated. Just like a checking account, you can only draw out what is in your account. Your health plan will contribute its share on a monthly basis and you can contribute additional funds up to the maximum amount
What are my options if I withdraw money from my HSA for an expense I thought was a qualified medical expense, and I find out later the expense is not a qualified medical expense?
You can return the money to the HSA if there is clear and convincing evidence the withdrawal was a mistake of fact. You must repay this money before April 15th of the year following when you knew or should have known that the withdrawal was a mistake.
Do I have to keep my receipts showing what I withdrew from my account?
Yes, you should keep your receipts. If you exceed your deductible, you may need the receipts to send to your HDHP. If you are audited by the IRS, you may need to explain your HSA expenditures.
HSA: IRS Tax Questions
What are the tax benefits of an HSA?
Tax benefits are three-fold: your additional voluntary contributions are pre-tax or tax-deductible*, interest earned is tax-free, and HSA distributions are tax-free if they are used to pay for qualified medical expenses.
* Contributions are tax-deductible on your Federal tax return. Some states do not recognize contributions to an HSA as deduction. Your own HSA contributions are either tax-deductible or pre-tax (if made by payroll deduction). See IRS Publication 969 . You should consult your tax advisor.
Are heath plan contributions to my HSA considered taxable income and are they tax-deductible?
"Premium pass through" payments are not considered income, and you can not deduct them on your income tax return.
May voluntary contributions to an HSA, while enrolled in an HDHP, be deducted pre-tax from my paycheck?
Starting in 2007, many Federal employees who are enrolled in HDHPs are eligible to make pre-tax allotments to their HSAs through The Federal Flexible Benefits Plan (FEDFLEX). For more information select this link.
Do I need to itemize on my tax return? What does the IRS require me to report on my taxes?
You do not have to itemize to receive the tax deduction. However, you need to complete IRS form 8889 with your income tax return. This form communicates to the IRS what your total withdrawals and deposits were from you account during the year.
What exactly is an "above the line" tax deduction? I'm assuming I don't have to report any of the distributions from the HSA to the IRS as long as they are for approved medical expenses?
"Above the line" means you will reduce your taxable income regardless of whether you itemize or use the standard deduction on your income tax form. The voluntary contributions are a tax deduction, not a tax credit. The distributions from your HSA are tax-free. The IRS will set rules and reporting requirements. Check with the IRS or your tax advisor.
Health Reimbursement Arrangements (HRA): The Basics
What is a Health Reimbursement Arrangement?
An HRA is an employer-funded tax-sheltered account to reimburse allowable medical expenses. HDHP members who do not qualify for an HSA, will be provided an HRA. There is no additional paperwork needed for enrollment into the HRA.
What are the general features of an HRA?
Tax-free withdrawals for qualified medical expenses
Carryover of unused credits from year to year
Credits in an HRA do not earn interest
Credits in an HRA are forfeited if you leave Federal employment or switch health insurance plans
Your HRA may be administered by the health plan.
How do I set up an HRA?
First, you must enroll in a High Deductible Health Plan. Depending on which HDHP you choose, the HDHP may send you an enrollment questionnaire. You must complete the questionnaire and return in to the plan. The plan will then set up the fund and contribute your deposits for each month you are enrolled. In some cases, plans may credit the full annual amount at the beginning of the year.
How will an HRA plan save me money?
An HRA may save you money through both lower premiums and tax-free medical reimbursements.
Is my HRA portable?
If you retire and remain in your health plan, you may continue to use and accumulate credits in your HRA. If you terminate employment or change health plans, only eligible expenses incurred while covered under that health plan will be eligible for reimbursement, subject to timely filing requirements. Unused credits are forfeited.
Can the unused funds in my HRA be rolled over each year?
Yes. Your credits accumulate without a maximum cap.
Is my money safe in this account?
Technically, this isn't money in an account, but a health reimbursement or credit arrangement you use to reimburse qualified medical expenses for yourself and your enrolled dependents.
What fees will I pay for an HRA?
Generally, there are no set-up or administrative fees but you need to check with your individual plan for detailed information on possible costs.
What happens to my HRA if I leave my health plan or job?
You may apply for reimbursement from your HRA for any qualified medical expenses incurred during the period of time you were enrolled in the HDHP and HRA. Your requests for reimbursement are subject to timely filing requirements. Any remaining funds will be forfeited. Please note if the plan credited the entire HRA funds at the beginning of the year, you will be responsible for returning the overpayment for the number of months remaining in the plan year.
HRA: Contributions
How is an HRA funded?
Your health plan will credit a portion of the health premium. The credit will be the same as the plan's HSA deposit for a Self Only or Self and Family enrollment.
How much can I contribute to my HRA?
You can not contribute any money to your HRA. Your HDHP will contribute a certain amount of premium into your HRA. This entire amount may be credited to the HRA at the beginning of the plan year, allowing for immediate access to funds. However, if you end your enrollment in your HDHP, you will not be entitled to the entire contribution. The amount will be prorated for the months you are enrolled in the plan. If you leave during the plan year after using the entire plan allotment, you will be responsible for returning the overpayment for the number of months remaining in the plan year.
Does my HRA earn interest?
No. Your HRA will not earn interest.
Since the HRA accounts are funded from the subscriber premiums, won't this benefit show up directly as a premium increase on top of the annual incremental increase for FY07? Is the major benefit over the FSA account one of convenience in record keeping by the health benefit provider?
Premiums are based on expected plan experience including the credits to an HRA. A major difference between a Health Care Flexible Spending Account (HCFSA) and an HRA is that unused credits in an HRA "roll over" from year to year. In an FSA, HCFSA or Dependent Care Flexible Spending Account (DCFSA), unused money is forfeited.
Limited Expense Health Care Flexible Spending Accounts (LEX HCFSA)
What is a limited expense health care flexible savings account?
A Limited Expense Health Care Flexible Savings Account (LEX HCFSA) is a money saving option available to employees who are enrolled in a Federal Employees Health Benefits (FEHB) Program high deductible health plan (HDHP) with a health savings account (HSA). Go to www.opm.gov/hsa if you want to learn more about HDHPs and HSAs.
What kind of expenses does the FSAFEDS LEX HCFSA cover?
Expenses are limited to dental and vision care services/products that meet the IRS definition of medical care. Eligible expenses include your out-of-pocket costs for such services/products as:
Dental Care |
Vision Care |
Cleanings |
Refractions |
Fillings |
Eyeglasses |
Crowns |
Contact lenses |
Orthodontics |
Vision correction procedures |
Dental and vision care costs are the only reimbursable expenses covered under the FSAFEDS LEX HCFSA. Cosmetic services - whether dental or vision related - are not eligible expenses. All of the other expenses normally eligible under a "general" health care flexible spending account are NOT eligible under a LEX HCFSA.
How does a LEX HCFSA save me money?
Normally, someone enrolled in a high deductible health plan with a health savings account cannot also have a general health care flexible spending account. IRS rules prohibit it. However, with a LIMITED expense HCFSA, you can have both accounts. Therefore, you can pay for your eligible out-of-pocket dental and vision care expenses with pre-tax salary dollars. Using pre-tax salary dollars gives you an immediate discount on these expenses equal to the taxes you would otherwise pay on your salary. By using a LEX HCFSA, you can preserve the funds in your health savings account to use/save for other purposes.
How do I enroll in a LEX HCFSA?
You may enroll in a LEX HCFSA during the FSAFEDS Open Season for the 2008 Benefit Period through their web site at www.FSAFEDS.com by selecting on Enroll Now on the home page. If you have questions during the enrollment process, contact an FSAFEDS Benefits Counselor, toll-free, at 1-877-FSAFEDS (372-3337), TTY: 1-800-952-0450, Monday through Friday, 9:00 A.M. until 9:00 P.M., Eastern Time.
When can I enroll in a LEX HCFSA?
You can enroll in a LEX HCFSA during the FSAFEDS Open Season for the 2008 Benefit Period, which is November 12 through December 10, 2007. Go to www.FSAFEDS.com and select Enroll Now to enroll.
How much pre-tax salary can I set aside in my LEX HCFSA for dental and vision care expenses?
You can set aside anywhere from a minimum of $250 up to $5,000 per year.
Are all my dependents covered under a LEX HCFSA like they are under a general purpose flexible spending account?
Yes, all dependents you claim on your Federal Income Tax return, or with whom you jointly file your taxes.
I thought I was supposed to spend my HSA funds on dental and vision expenses. Why would I want an FSA account too?
By establishing an LEX HCFSA, you can save money on taxes by using FSA dollars for dental and vision care while preserving your HSA funds for other purposes, including simply saving those funds for the future.
HRA: Coverage
What expenses can I pay for with my HRA?
You can use funds in your account to pay:
qualified medical expenses that do not count toward the deductible
your health plan's deductible
your Medicare premiums
HRA: Eligibility
Who is eligible for an HRA?
You are eligible for an HRA if you are enrolled in an HDHP and:
You are enrolled in Medicare,
You are covered by another non-HDHP health plan, or
You are not otherwise eligible for an HSA.
HRA: Withdrawal
When can I use my HRA?
You can use funds as available to reimburse yourself for your deductible or other out-of-pocket medical expenses.
What expenses qualify for reimbursement?
Please refer to IRS Publication 502 for more details about qualified medical expenses. In addition, over-the-counter drugs may be reimbursed from your HRA account in an HDHP.
What if my medical expenses are more than my health reimbursement arrangement balance?
You would pay any difference between the balance in your HRA and the deductible.
Do I have to use my HRA to pay for my annual physical or flu shot?
No. Preventive care is usually covered at 100%, sometimes after a small copay, or up to a maximum dollar amount such as $300.
How will the HRA be paid out?
Please consult your plan brochure
HRA: IRS Tax Questions
What are the tax benefits of an HRA?
Credits to your HRA are made through your HDHP's premium pass through. The money you receive for reimbursements of qualify medical expenses are free of federal, state, and FICA taxes.
What does the IRS require me to report on my taxes concerning my HRA?
Nothing. Your HRA is a health benefit.
Questions relating to HDHPs, HSA, HRA and Health Care Flexible Spending Account (HCFSA)
Do my prescription expenses apply to the catastrophic plan limit?
Yes. The amount you pay for allowed prescription expenses is applied to the catastrophic limit includes the deductible and coinsurance.
In very simple terms, how will an HDHP/HSA or an HRA help the FEHB member?
An HDHP/HSA or HRA provides insurance coverage and catastrophic coverage and a tax-advantaged way to help save for future medical expenses. It provides greater flexibility and discretion over how to use your health care dollars.
Will the insurance companies file the reimbursement claim for us, as they do for the Flexible Spending Account?
This may occur under certain circumstances. Please consult the plan.
"You can pay your deductible with funds from your HSA or HRA." Please explain this. How will we access the funds? If the access is not immediate, most physicians must have payment when services are rendered.
The process is different between an HSA and HRA. Access to an HSA or an HRA depends on the individual health plan's administrative procedures. Some plans will offer a debit card or checks. If you use a network physician, the provider will first bill the health plan for his or her services. The provider will then bill you for any amounts you owe after your health plan has paid what it owes under the terms of your plan benefits. It's best to allow you plan to process your claim before you access your account.
Will reimbursement from the plan operate pretty much the same as the current FSAFEDS? That is, will we fax in receipts to a single source independent from the health plan provider for items we believe are covered, have someone verify it is an approved expense and receive a payment for the approved item?
You will not be required to prove eligible medical expenses in order to withdraw funds from your HSA. We suggest saving your documentation. The IRS may ask for it if you are audited. You may obtain reimbursement from your HSA in a number of different ways, depending on the procedures established by your account trustee.
Will High Deductible Health Plans with a Health Savings Account or a Health Reimbursement Arrangement attract only the young and healthy causing other FEHB health premium rates to increase?
OPM believes this type of FEHB health plan will attract the interest of Federal employees and retirees regardless of age and health status who want to have more control over how their healthcare dollars are spent. To our knowledge, our approach is unique as we have combined HSA and HRA provisions in each of our High Deductible Health Plans (HDHP) to make them attractive to all age groups. We have also incorporated features to assure our HDHP premiums are within the mainstream of FEHB premiums. We will, of course, monitor implementation just as we do for any new program and take appropriate action to correct any adverse effects.
My spouse is covered by her own non-Federal health plan. If I select a family HDHP to cover the kids, does my spouse's plan affect my eligibility for the HSA or HRA?
If you are not covered by your spouse's health plan, you are eligible for an HSA. You are ineligible when you are covered by another health plan.
If used for vision and dental, can I, as the enrollee, choose the provider I prefer or is this choice made by the health plan?
If the benefit is not covered by your plan, you can use the money in your HSA to pay dental and vision claims for services by a provider of your own choosing.
What is the difference between HSAs and a Health Care Flexible Spending Account (HCFSA)? It seems as though they serve the same purpose.
An HSA is similar to an HCFSA as it is funded with pre-tax dollars which can be used for the same type of health care expenses. However, HSAs are only available to employees who elect an HDHP while HCFSAs are not restricted to any type of plan. You cannot have an HSA and an HCFSA at the same time. HSA balances roll over from year to year and continue to grow tax-free. HCFSA money is lost if you do not spend it by the end of each year. Please see the Comparison Chart for HSA, HRA and HCFSA .
Are there any safeguards in place to prevent an employee from enrolling in both an FSA and an HSA? Or if it does occur, what instructions should human resource and payroll offices follow?
The employee is responsible for making sure they are not enrolled in an FSA or other type of health benefit disqualifying for an HSA. OPM and the HDHP health plans will provide guidance and advice to help enrollees make accurate decisions; however, it is ultimately the enrollee's responsibility to follow IRS rules when filing their Federal income taxes. No action is needed by either the human resources office or payroll office.
One of the attractions of the HCFSA is from the day the account is activated, the full amount pledged is available regardless of how little has actually been paid into the account. With an HDHP/HSA or HRA you only can use the money collected in the year or rolled over from prior years including interest. It may be a hard sell to anyone unless they have a large lump-sum to invest as "seed" money, or they are really sure they or their family will not become ill in the beginning of the year.
With an HSA only the amount of the health plan monthly "premium pass through" and the individual's voluntary contribution accumulated to date is available for reimbursements. Of course, you can wait to file for a reimbursement until after the account has had a chance to build up to the needed amount. However, HRAs of some plans will be credited with the annual amount at the beginning of the plan year and others will accumulate monthly.
May an FSAFEDS participant transfer the balance from an HCFSA to an HSA or HRA?
No.
An FEHB enrollee chooses an HDHP/HSA for 2007. The FEHB enrollee cannot participate in a general purpose HCFSA. May the FEHB enrollee participate in a DCFSA?
Yes, the FEHB enrollee will still be eligible to have a dependent care FSA. Unlike with an HCFSA, an enrollment in an HDHP/HSA does not affect eligibility for a dependent care FSA.
Questions Relating to Retirees and Military Veterans
Retiree and Early Retiree
If I'm still working and turn age 65 and qualify for Medicare, but do not elect to take it, will my HDHP continue to make contributions for me until Medicare is primary?
Yes. You are eligible for an HSA after age 65 until you are enrolled in Medicare Part A or Part B.
If I retire before age 65, can I begin using my HSA for non-medical expenses, or will I need to wait until age 65?
If you use your HSA for non-medical withdrawals prior to age 65, the amount will be included in your gross income and you will pay a 10% penalty.
A spouse is Medicare enrolled, the employee has Self and Family coverage under FEHB including the spouse. Is the employee eligible for an HSA or is the employee limited to an HRA?
You are eligible for an HSA if you enroll in an HDHP, even if your spouse is enrolled in Medicare, and you may contribute the amount permitted for a Self and Family enrollment. You may pay for your spouse's non-reimbursable medical expenses from your HSA.
An employee is retiring, the spouse is already enrolled in Medicare, the employee will continue Self and Family coverage (for self & spouse) after retirement. Can the employee continue the HSA?
As long as you are not enrolled in Medicare or another health insurance plan and enrolled in an HDHP, you may continue contributing to the HSA.
I have FEHB coverage and I'm a military retiree who has TRICARE. Can I get an HSA or FSA?
People with TRICARE cannot have an HSA because TRICARE does not qualify as an HDHP. However, if you are an employee (not retired) and eligible for FEHB coverage, you can have an HCFSA instead.
An FEHB member retires, under age 65, mid-year 2008. In 2008 the member selected a HDHP/HSA. What happens at the point of retirement with the HSA? Will voluntary contributions be allowed?
The HSA is still the FEHB member's account. As long as the retiree remains enrolled in his HDHP and is not covered by another health plan or Medicare, he is eligible to continue making contributions to the HSA. Voluntary contributions may also be made.
An FEHB enrollee is 61 and retired from Federal employment. Would it make sense financially to select an HDHP/HSA now and NOT enroll in Medicare when he becomes 65?
There is no single answer as to what option is best. You need to review the following before making your choice: your medical expenses and those of your family, the benefits offered by an HDHP for which you are eligible, the amount you can contribute to the HSA, and your tax information. Please keep in mind that your Medicare Part B premium may be higher if you do not enroll when you first become eligible. It may not be in your financial interest to turn down Medicare coverage.
What are the advantages and disadvantages of an HRA for a retiree on Medicare?
If I am retired and on Medicare now, do I continue with Medicare if I select an HRA?
The remaining HRA credit "rolls over" if not used in the current year. You can use it to pay for Part B or Part D Medicare premium.
I am about to retire. I had pretty much decided not to take Medicare Part B, because there did not seem to be any plans under FEHB which would give me a discount if I did (i.e. Medigap). Does this plan provide an equivalent to a Medigap policy?
An HDHP is not a Medigap policy. To be eligible to enroll in an HDHP with an HSA, you must not be enrolled in Medicare Part A or Part B. However, please note a number of the current fee-for-service health plans do waive or reduce deductibles and co-payments, if you are enrolled in both Medicare A and B. You may also consider suspending your FEHB enrollment if you enroll in a Medicare managed care plan.
How will an HSA/HRA coordinate with a dual eligible, FEHB member and FEHB retiree, who has TRICARE coverage?
You are not eligible for an HSA if you have TRICARE For Life. You may, however, have an HRA.
What happens when an FEHB member who is enrolled in an HDHP with an HSA becomes eligible for Medicare?
The HSA will be available for qualified medical expenses including premiums. Your health plan will discontinue making contributions to your HSA and will open and begin crediting an HRA for you.
Military Veteran
To qualify for an HSA you cannot be enrolled in a health care program already. If this is correct, does being a Veteran enrolled in the VA Health Care System prevent me from being eligible for an HSA? I am a Federal employee.
IRS guidance states you are not eligible to make contributions to your HSA for three months after each use of VA medical or prescription drug services.
A husband and wife are covered under FEHB with Self and Family coverage. The husband is the employee and receives VA disability benefits due to a military - related injury. Do VA disability benefits disqualify the husband from HDHP/HSA? If yes, should the husband and wife choose Self Only coverage and choose an HDHP/HSA?
Individuals receiving a VA disability benefit are entitled to enroll in an HDHP and establish an HSA. However, IRS guidance states they cannot make a contribution to their HSA for 3 months after each use of VA medical or prescription drug services.
Could you clarify the definition of VA benefits? Is it medical care only or other benefits?
VA benefit refers to any medical services and prescription drug benefits.
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