Info About Insurance

– specific disease or illness insurance and accident, disability, dental care, vision care and long-term care insurance

– Employee Assistance Programs, disease management program or wellness program

• These programs must not provide significant benefits in the nature of medical care or treatment

– Drug discount cards

– Eligibility for VA Benefits

• Unless you have actually received VA health benefits in the last 3 months

– Medicare

– Tricare Coverage

– Flexible Spending Arrangements

– Health Reimbursement Arrangements

• There are permitted HSA/HRA/FSA combinations

Permitted HSA/HRA/FSA combinations:

– “Limited purpose” FSAs and HRAs that restrict reimbursements to certain permitted benefits such as vision, dental, or preventive care benefits

– “Post-deductible” FSAs or HRAs that only provide reimbursement after the minimum annual deductible has been satisfied under the HDHP

– “Retirement” HRAs that only provide reimbursement after an employee retires

– “Suspended” HRAs where the employee has elected to forgo health reimbursements for the coverage period

• Health insurance plan with minimum deductible of (for 2006):

– $1,050 (self-only coverage)

– $2,100 (family coverage)

– These amounts are indexed annually for inflation

• Annual out-of-pocket (including deductibles and co-pays) cannot exceed (for 2006):

– $5,250 (self-only coverage)

– $10,500 (family coverage)

– These amounts are indexed annually for inflation

• Reasonable benefit designs not counted toward the out of pocket maximum include:

– Lifetime limits on benefits

– Limits to usual, customary and reasonable (UCR) amounts

– Limits on specific benefits

• Maximum number of days or visits covered

• Maximum dollar reimbursements

– Pre-certification requirements

• HDHPs can have:

– first dollar coverage (no deductible) for preventive care (copays allowed)

– higher out-of-pocket (copays & coinsurance) for non-network services

• In-network deductible determines contribution limit

• All covered benefits must apply to the plan deductible, including prescription drugs

Prescription Drugs

• HDHPs must apply costs of prescription drugs to the annual deductible or the individual may not contribute to an HSA

• Transition relief provided until January 1, 2006 if the individual is covered by a prescription drug benefit provided by a separate plan or rider from the HDHP

Preventive Care

• Preventive care generally does not include any service or benefit intended to treat an existing illness, injury or condition

• Certain drugs and medications can be considered preventive care

– Drugs taken by a person who has developed risk factors for a disease that has not yet manifested itself or to prevent reoccurrence of a disease

– Example: Cholesterol-lowering medication for those with high cholesterol

Preventive Care

• Safe harbor list of preventive care that HDHP can provide as first-dollar coverage before minimum deductible is satisfied:

– Periodic health evaluations (e.g., annual physicals)

– Screening services (e.g., mammograms)

– Routine pre-natal and well-child care

– Child and adult immunizations

– Tobacco cessation programs

– Obesity weight loss programs

• Can apply co-pays to preventive care services

Conflicts with state benefit mandates

• State mandated first dollar coverage will result in plan losing status as HDHP

– NJ requires first dollar coverage of any treatment of lead poisoning

• Transition relief for state mandates in place on January 1, 2004

– Plans containing such mandates will not lose status as HDHP prior to January 1, 2006

– After that date, plan will lose status as HDHP if such mandates remain in place

• If married, the spouse inheriting the HSA is treated as the owner

• If not married:

– The account will no longer be treated as an HSA upon the death of the individual

– The account will become taxable to the recipient of it (including the estate of the individual)

• Taxable amount will be reduced by any qualified medical expenses incurred by the deceased individual before death and paid by the recipient of the HSA

• The taxable amount will also be reduced by the amount of estate tax paid due to inclusion of the HSA into the deceased individual’s estate

• Accounts are owned by the individual (not an employer). The individual decides:

– Whether he or she should contribute

– How much to use for medical expenses

– Which medical expenses to pay from the account

– Whether to pay for medical expenses from the account or save the account for future use

– Which company will hold the account

– What type of investments to grow account

• Employer cannot restrict

– What distributions from an HSA are used for

– Rollovers

• HSA Custodian or Trustee can put reasonable limits on accessing the money in the account

– Frequency of distributions

– Size of the distributions

• Who can be an HSA Trustee or Custodian?

– Banks, credit unions

– Insurance companies

– Entities already approved by the IRS to be an IRA or Archer MSA trustee or custodian

– Other entities can apply to the IRS to be approved as a non-bank trustee or custodian

• IRS has provided model HSA Trustee and Custodian Forms

• Trustee or custodian fees

– Can be paid from the assets in the HSA account without being subject to tax or penalty

– Can be directly paid by the beneficiary without being counted toward the HSA contribution limits