Health Insurance Savings Arrangements (HSAs)

Health Savings Arrangements (H.S.A’s, and Consumer-Directed Health Plans)

President George W. Bush signed a Medicare Bill on December 8, 2003, which created the tax-favored treatment of the H.S.A. They are designed to help employees and individuals save for qualified medical expenses tax-free.

An H.S.A is an account owned by an individual or employee and is used to pay for current and future medical expenses. In order to qualify for a plan, an employee must be enrolled in an IRS qualified High-Deductible Health Plan or HDHP. Insurance does not cover the first dollar of expenses, other than preventive care, and can work with an HMO, Indemnity or PPO plan as long as they meet the IRS guidelines for a HDHP.

There are some guidelines for eligibility for an H.S.A such as: being covered by a HDHP, you CAN NOT be covered by another health insurance plan, and you must not be enrolled in Medicare. There are NO income limits on who may contribute to an H.S.A either.

There are some combinations of H.S.A/HRA combinations such as “limited purpose” HRAs that restrict expense reimbursements to certain things such as dental or vision.

In 2008, the minimum deductible amounts for a single employee were $1100, and $2200 for family coverage. As such the maximum annual out-of-pocket expenses accordingly are $5600 for singles and $11200 for families. These amounts are indexed annually for inflation.

For more information you can visit the Treasury Departments home page at: www.ustreas.gov