Frequently Asked Questions (FAQs)
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High Deductible Health Plans (HDHP)
Health Savings Accounts (HSA)
Health Reimbursement Arrangements (HRA)
High Deductible Health Plans (HDHP)
What is a High Deductible Health
Plan?
A High Deductible Health Plan (HDHP) is a new health plan product that,
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.
An HDHP has a minimum annual deductible of $1,050 for Self coverage
and $2,100 for Self and Family coverage (the deductible amount is indexed
every year).
- HDHPs have annual out-of-pocket limits which do not exceed $5,000
for Self coverage and $10,000 for Family coverage.
- Service delivery in HDHP program within Federal Employees Health Benefits
(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
of after a small deductible, or copayment. Or, a maximum dollar (up
to $300 for instance) may apply.
Health Savings Accounts (HSA)
What is a Health Savings Account?
When you enroll in an HDHP, the health plan determines whether you
are eligible for a Health Savings Accounts (HSA) or a Health Reimbursement
Arrangement (HRA). An HSA is a trust account that you own for the purpose
of paying qualified medical expenses for yourself, your spouse, and
your dependents.
What are the general features
of an HSA?
- Your own HSA contributions are tax-deductible
- 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
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 flexible spending account (FSA), a spouse’s FSA, a spouse’s 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.
How can 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, generally the HDHP plan’s deductible. You can claim
your total amount contributed for the year as an “above the line” tax
deduction when you file your income taxes. You receive tax advantages
in any case. You have until April 15 of the following year to make
HSA contributions for the prior year. If you are over age 55 you can
make additional catch-up contributions.
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 premiums, and health insurance premiums if you are receiving
federal unemployment compensation, over-the-counter drugs, LASIK surgery
and some nursing services.
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 click
on “Forms and Publications.”
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.
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.
Can the unused funds in my HSA
be rolled over each year?
Yes. Your funds will accumulate without a maximum cap.
Are heath plan contributions
to my HSA considered taxable income and are they tax deductible?
“Premium pass through” payments are not considered income but
you can not deduct then on your income tax return.
Does the money in my HSA earn
interest?
Yes. Your HSA funds are invested. Depending on which HDHP product
you choose, the interest rate and payment of interest will vary. Your
earnings are tax free.
What happens to my HSA if I leave
my health plan or job?
You own your account, so you keep your HSA, even if you change health
plans or leave Federal government. If you no longer are enrolled in
a HDHP you are not eligible to make payments to your HSA, but you may
request withdrawals for qualified medical expenses.
What is the survivor benefits
associated with my HSA?
Your HSA would pass to your surviving spouse or named beneficiary tax
free. If you do not have a named beneficiary, the money is disbursed
to your estate and is taxable.
What is the difference between
an HSA and a Health Care Flexible Spending Account (HCFSA)? It seems as
though they serve the same purpose.
An HSA is similar to a HCFSA in that it is funded with pre-tax dollars
that can be used for the same type of health care expenses. However,
HSAs are only available to employees who elect a HDHP while HCFSAs
are not restricted to any type of plan. You cannot have a HSA and
a 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.
Health Reimbursement Arrangements
(HRA)
What is a Health Reimbursement
Arrangement?
HDHP members who do not qualify for an HSA, will be provided an
HRA. An HRA is an employer-funded account to reimburse allowable medical
expenses. 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 the federal employment
or switch health insurance plans
- Your HRA is administered by the health plan.
Who is eligible for an HRA?
You are eligible for an HRA if you are enrolled in an HDHP and:
- You are not eligible for an HSA,
- You are enrolled in Medicare, or
- You are covered by another non-HDHP health plan
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.
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
- to pay your health plan’s deductible
- to pay your medicare premiums
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 full list.
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.
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 in that 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 that 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.
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