High Deductible and Consumer-Driven Health Plans With a Health Savings Account or Health Reimbursement Arrangement
A High Deductible Health Plan (HDHP) provides comprehensive coverage for high-cost medical
events and a tax-advantaged way to help you build savings for future medical expenses. The
HDHP gives you greater flexibility and discretion over how you use your health care benefits.
When you enroll, your health plan establishes for you either a Health Savings Account (HSA) or
a Health Reimbursement Arrangement (HRA). The plan automatically deposits the monthly "premium
pass through" into your HSA. The plan credits an amount into the HRA. (This is the "Premium
Contribution to HSA/HRA" column in the following charts).
Preventive care is often covered in full, usually with no or only a small deductible or copayment.
Preventive care expenses may also be payable up to an annual maximum dollar amount
(up to $300 for instance). As you receive other non-preventive medical care, you must meet the
plan deductible before the health plan pays benefits. You can choose to pay your deductible
with funds from your HSA or you can choose instead to pay for your deductible out-of-pocket,
allowing your savings to continue to grow.
The HDHP features higher annual deductibles (a minimum of $1,100 for Self and $2,200 for
Family coverage) and annual out-of-pocket limits (not to exceed $5,600 for Self and $11,200 for
Family coverage) than other insurance plans. Depending on the HDHP you choose, you may
have the choice of using in-network and out-of-network providers. There may be higher
deductibles and out-of-pocket limits when you use out-of-network providers. Using in-Network
providers will save you money.
Health Savings Account (HSA)
A health savings account allows individuals to pay for current health expenses and save for
future qualified medical expenses on a pre-tax basis. Funds deposited into an HSA are not taxed,
the balance in the HSA grows tax free, and that amount is available on a tax free basis to pay
medical costs. To open an HSA you must be covered under a High Deductible Health Plan and
cannot be eligible for Medicare or covered by another plan that is not a High Deductible Health
Plan or be a dependent on another person's tax return. If you are enrolled in a High Deductible
Health Plan with an HSA you may not participate in a Health Care Flexible Spending Account
(HCFSA), but you are permitted to participate in a Limited Expense (LEX) HCFSA. HSAs are subject
to a number of rules and limitations established by the Department of the Treasury. Visit
www.ustreas.gov/offices/public-affairs/hsa for more information. The 2008 maximum contribution
limits are $2,900 for Self Only coverage and $5,800 for Self and Family coverage. If you are
over 55, you can make an additional "catch up" contribution. You can use funds in your account
to help pay your health plan deductible.
Starting in 2007, Federal employees who are enrolled in HDHPs became eligible to make
pre-tax allotments to their HSAs through The Federal Flexible Benefits Plan (FEDFLEX). By
January 1, 2008, eligible employees will be able to make these allotments to their HSAs.
OPM has worked with payroll providers and employee self service systems to provide
this service.
Features of an HSA include:
- Tax-deductible deposits you make to the HSA. Your own HSA contributions are either taxdeductible
or pre-tax (if made by payroll deduction).
See IRS Publication 969.
- Tax-deferred interest earned on the account.
- Tax-free withdrawals for qualified medical expenses.
- Carryover of unused funds and interest from year to year.
- Portability; the account is owned by you and is yours to keep - even when you retire,
leave government service, or change plans.
Health Reimbursement Arrangement (HRA)
Health Reimbursement Arrangements are a common feature of Consumer-Driven Health Plans.
They may be referred to by the health plan under a different name, such as personal care
account. They are also available to enrollees in High Deductible Health Plans who are not eligible
for an HSA. HRAs are similar to HSAs except:
- an enrollee cannot make deposits into an HRA;
- a health plan may impose a ceiling on the value of an HRA;
- interest is not earned on an HRA;
- and the amount in an HRA is not transferable if the enrollee leaves the health plan.
If you are enrolled in a High Deductible Health Plan with an HRA you may participate in a
Health Care Flexible Spending Account (HCFSA).
The plan will credit the HRA different amounts depending on whether you have a Self Only or a Self and Family enrollment. You can use funds in your account to help pay your health plan
deductible.
Features of an HRA include:
- 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 the HRA are forfeited if you leave federal employment or switch health
insurance plans
|
HEALTH SAVINGS ACCOUNT (HSA) |
HEALTH REIMBURSEMENT ARRANGEMENT (HRA) |
ELIGIBILITY |
You must enroll in a High Deductible
Health Plan (HDHP). No other general
medical insurance coverage is permitted.
You cannot be enrolled in Medicare Part A
or Part B. You cannot be claimed as a
dependent on someone else's tax returns. |
You must enroll in a High Deductible
Health Plan (HDHP). |
FUNDING |
The plan deposits a monthly "premium pass through" into your account. |
The plan deposits the credit amount directly into your account. |
CONTRIBUTIONS |
The maximum allowed is a combination
of the health plan "premium pass through"
and the member contribution up to the
maximum contribution amount set by the
IRS each year. |
Only that portion of the premium specified
by the health plan will be contributed. You
cannot add your own money to an HRA. |
DISTRIBUTIONS |
May be used to pay the out-of-pocket
medical expenses for yourself, your
spouse, or your dependents (even if they
are not covered by the HDHP), or to pay
the plan's deductible. See IRS Publication 502 for a complete list
of eligible expenses, including over-thecounter
drugs. |
May be used to pay the out-of-pocket
expenses for qualified medical expenses for
individuals covered under the HDHP, or to
pay the plan's deductible. See IRS Publication 502 for a complete list of
eligible expenses. |
PORTABLE
| Yes, you can take this account with you
when you change plans, separate from service, or retire.
|
If you retire and remain in your HDHP 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 HDHP will be
eligible for reimbursement, subject to timely
filing requirements. Unused credits are
forfeited. |
ANNUAL ROLLOVER |
Yes, funds accumulate without a maximum cap. |
Yes, credits accumulate without a maximum cap. |
IMPORTANT REMINDER: This is only a summary of the features of the HDHP/HSA or HRA. Refer to the specific Plan brochure for the complete details covering Plan design, operation, and administration as each Plan will have differences.
A Consumer-Driven plan provides you with freedom in spending health care dollars the
way you want. The typical plan has common features: member responsibility for certain up-front
medical costs, an employer-funded account that you may use to pay these up-front costs,
and catastrophic coverage with a high deductible. You and your family receive full coverage for
in-network preventive care.