U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

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

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.

• See Table 1
• See Table 2

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