New Questions
& Answers from the FAQ Suggestion Email Box
Thank your for your interest in learning more about the new health plan
option for 2005—the High Deductible Health Plan (HDHP) with a Health
Savings Account (HSA) or a Health Reimbursement Arrangement (HRA). Each
plan or plan option has its unique features. For complete details refer
to the individual plan brochure, available on the Federal
Employees Health Benefits Program (FEHB) website.
Please select one of the items below to see questions related to that
area:
HDHP/HSA or HRA: Obtaining Information
HDHP/HSA or HRA Features: Advantages
HDHP/HSA or HRA Features: Basics
HDHP/HSA or HRA Features:
Contributions
HDHP/HSA or HRA Features: Coverage
HDHP/HSA or HRA Features: Deductible
HDHP/HSA or HRA Features:
Eligibility
HDHP/HSA or HRA Features:
Reimbursements
HCFSA
Military Veteran
Retiree and Early Retiree
IRS Tax Questions
HDHP/HSA or HRA: Obtaining Information
Can the HDHPs be released and posted
on the FEHB website prior to the start of 2005 Open Season?
This information will be included in the FEHB Open Season website.
We plan to bring up the open season website the first week in November.
When will the HDHP carriers
be available to receive employee telephone calls?
The FEHB carriers offering an HDHP product will respond to questions
about their HDHP beginning no later than November 8, the beginning date
of the 2004 FEHB Open Season.
When will we be able
to look at information from the health plan providers on their HDHP options?
The information will be available no later than November 8, the beginning
date of the FEHB Open Season.
Which health plans are offering an HDHP (which includes an HSA or an HRA) and how do I contact them?
We’ve listed the health plans with the telephone number and website.
HDHP/HSA or HRA Features: Advantages
In very simple terms,
how will an HDHP/HSA or an HRA help the FEHB member?
An HDHP/HSA or HRA provides insurance coverage and catastrophic coverage
and a tax-advantaged way to help save for future medical expenses. It
provides greater flexibility and discretion over how to use your health
care dollars.
Will there be a Savings
Calculator available so we can enter our personal information and compare
the costs/benefits of the High Deductible Health Plan/HSA to a Flexible
Spending Account (FSA)?
Some FEHB carriers offering an HDHP will have a calculator on their
website.
Who would benefit from
changing to such a plan, and why? And, who would NOT benefit from such
a plan and why?
There are a number of steps an FEHB member should take to assist them
in making an informed decision if an HDHP/HSA or HRA is the right health
program for them.
- Review the listing of the new health care plans available where
you live or work,
- Determine the premium you would pay out of your pay check,
- Review the plan design elements: deductible, out-of-pocket limits,
the amount of the plan contributions: “premium pass through”
for the HSA or the credits to the HRA,
- Subtract the annual plan contributions from the annual plan deductible
to determine the true out-of-pocket cost,
- Review the eligibility considerations for an HSA. If you are not
eligible for an HSA would you accept an HRA?
- Ask yourself if you are in a financial position to be able to pay
the annual deductible amount required (depending on Self Only deductible
or Self and Family deductible) should you or a family member require
a high medical cost service in the early months of 2005,
- Determine if your financial resources allow you to make tax-advantaged
voluntary contributions and “catch up” contributions (if
you are between the ages of 55 and 65).
How much will the average
enrollee save by changing to an HSA/HDHP plan?
The savings are different for each individual. It depends on the FEHB
member’s individual Federal tax situation.
What is the main financial
risk (i.e. If you have an expensive year medically, how much will it cost
you under plan x, or plan y)?
Your out-of-pocket expenses for covered medical services are limited
to the catastrophic in-network limit of $5,000 for Self Only coverage
and $10,000 for Self and Family coverage.
How much less expensive
are the HDHP premiums?
The premiums are similar to the premiums for many plans’ standard
option but the plan contributes some money from the premium, the “premium
pass through” to the FEHB member’s HSA.
HDHP/HSA or HRA Features: Basics
“The health
plan credits a portion of the health plan premium to the HSA.” I
do not understand that statement. Does that mean I would pay a higher
premium than people without HSA, but part of it goes into the savings
account?
The Office of Personnel Management (OPM) and the FEHB carrier have
agreed on a premium rate for the HDHP. This premium is comparable to
the premium for many plans’ standard option. The FEHB carriers
will allot a specified portion of the premium to be “passed through”
on a monthly basis to the FEHB member’s HSA.
Explain what this
means: “HDHPs have annual out-of-pocket limits which do not exceed
$5,000 for Self Only coverage and $10,000 for Self and Family coverage”?
An FEHB member enrolled in an HDHP will not have to pay more than the
plan’s annual catastrophic limit of $5,000 for in-network self
only coverage and $10,000 for self and family coverage, including the
deductible.; some non-HDHP plans have a lower catastrophic limit.
Please clarify with
examples: “Tax-free withdrawals for qualified medical expenses.”
What are qualified expenses?
The IRS defines qualified medical expenses. See IRS
Publication 502 for a list of eligible expenses. However, over-the-counter
medicines are considered qualified medical expenses even though they
are not stated in the IRS Publication 502. Also, insurance premiums
are not qualified medical expenses even though they are stated in the
IRS Publication 502.
Is an HDHP separate
from the current FEHB plans?
No, the HDHP will be offered through the FEHB Program.
Will there be any
fees associated with the Health Savings Account?
Yes, there will be administrative fees that will vary by plan.
Since the HRA accounts
are funded from the subscriber premiums, won’t this benefit show
up directly as a premium increase on top of the annual incremental increase
for FY05? Is the major benefit over the FSA account one of convenience
in record keeping by the health benefit provider?
Premiums are based on expected plan experience including the credits
to an HRA. A major difference between a Health Care Flexible Spending
Account (HCFSA) and an HRA is that unused credits in an HRA “roll
over” from year to year. In an FSA, HCFSA or Dependent Care Flexible
Spending Account (DCFSA), unused money is forfeited.
I am a little unclear
on what the biweekly payments would be for these plans. What percentage
goes towards the HSA or HRA? What will the premiums be? I guess I am wondering
what the benefits of this program are over the traditional HMO? If I have
to pay $150 in biweekly premiums and $50 goes toward the HSA or HRA, have
I really saved anything because of the high deductibles?
Premium contributions and other plan features differ among plans; more
information will be available through the 2005 Guide to Federal Employees
Health Benefits on the FEHB website, through the employing agency,
and from the HDHP carrier. These items will be available no later than
the start of Open Season, November 8th.
Why won’t FEHB
be offering an indemnity-type HDHP instead of only PPO, HMO, or POS?
GEHA and Mail Handlers are nation wide indemnity type plans that will
offer an HDHP with both in and out of network benefits.
Are there any safeguards
in place to prevent an employee from enrolling in both an FSA and an HSA?
Or if it does occur, what instructions should human resource and payroll
offices follow?
The employee is responsible for making sure they are not enrolled in
an FSA or other type of health benefit that is disqualifying for an
HSA. OPM and the HDHP health plans will provide guidance and advice
to help enrollees make accurate decisions; however, it is ultimately
the enrollee’s responsibility to follow IRS rules when filing
their Federal income taxes. No action is needed by either the human
resources office or payroll office.
Can my agency’s
credit union administer my HSA account?
Yes. A Federally chartered credit union qualifies under Treasury Regulations
as a trustee/custodian. However, you will need to check with your specific
credit union. If your credit union functions as an HSA trustee/custodian,
you work with them in two ways:
- Submit your voluntary contributions, and
- Transfer funds from the trustee/custodian selected by your plan
to the credit union.
HDHP/HSA or HRA Features: Contributions
How
is the HSA maximum contribution calculated?
By statute, the annual HSA contribution cannot exceed the amount of
the plan’s yearly
deductible; however, additional contributions are available to those
ages 55 and over.
Can
we make voluntary contributions to the HSA via payroll deduction?
We suggest you check with your agency. Agencies have procedures for
having voluntary contributions withheld from employees’ salary
but procedures and capacity vary by agency.
The
FAQ said that generally the annual limit for contributions to the HSA
would be the plan deductible. Since the term “generally” was
used, how would we determine exactly what our yearly limit would be?
Under IRS guidelines, the annual limit for contributions to the HSA
is the plan’s deductible up to a maximum amount established by
law. None of the plans participating in the FEHB Program have annual
deductibles exceeding the legal maximum. However, the plan will pay
its share of this amount and the enrollee may make voluntary contributions
up to the maximum amount. You must be eligible at the beginning of each
month. If you are between the ages 55 and 65, you can make additional
“catch-up” contributions. For 2005, the individual “catch
up” contribution to an HSA is $600. This will be an “above
the line” deduction from your Federal income tax.
What
happens during the year, while covered under an HDHP/HSA, when one changes
from Self to Self and Family or vice versa based on a qualified life event?
You will be able to continue contributing to your HSA. The amount you
are permitted to
contribute will change from the Self Only to Self and Family contribution
or vice versa, prorated appropriately for the year.
HDHP/HSA or HRA Features: Coverage
If you have an
HDHP/HSA and go to the doctor for a visit, not preventive service, on
the day the plan coverage begins, are you charged the typical co-payment
visit or are you responsible for paying the full doctor charge as if you
had no insurance?
You are responsible for the full amount until you meet your deductible,
then co-payments and co-insurance apply.
One of the attractions
of the HCFSA is that from the day the account is activated, the full amount
pledged is available regardless of how little has actually been paid into
the account. With an HDHP/HSA or HRA you only can use the money collected
in the year or rolled over from prior years including interest. It may
be a hard sell to anyone unless they have a large lump-sum to invest as
“seed” money, or they are really sure that they or their family
will not become ill in the beginning of the year.
With respect to the HSAs you are correct. Only the amount of the health
plan monthly “premium pass through” and the individual’s
voluntary contribution accumulated to date is available for reimbursements.
Of course, you can wait to file for a reimbursement until after the
account has had a chance to build up to the needed amount. However,
HRAs of some plans will be credited with the annual amount at the beginning
of the plan year and others will accumulate monthly.
If used for vision
and dental, can I, as the enrollee, choose the provider I prefer or is
this choice made by the health plan?
If the benefit is not covered by your plan, you can use the money in
your HSA to pay dental and vision claims for services by a provider
of your own choosing.
Is it true you
can use money from you HSA for even non-preferred providers?
Yes, money from your HSA can be used to pay for all qualified medical
expenses including over-the-counter drugs. You will usually save money,
however, if you use network providers. See IRS
Publication 502 for a list of eligible expenses.
I have a Self
Only health plan. Will my spouse’s otherwise uncovered medical expenses
be payable from my HSA, the way they are from my current FSA?
Yes, you may use the money in your HSA to pay your spouse’s or
other family members’ uncovered medical expenses.
HDHP/HSA or HRA Features: Deductible
“You
can pay your deductible with funds from your HSA or HRA.” Please
explain that statement. How will we access the funds? If the access is
not immediate, most physicians must have payment when services are rendered.
The process is different between an HSA and HRA. Access to an HSA or
an HRA depends on the individual health plan’s administrative
procedures. Some plans will offer a debit card or checks. If you use
a network physician, the provider will first bill the health plan for
his or her services. The provider will then bill you for any amounts
you owe after your health plan has paid what it owes under the terms
of your plan benefits. It’s best to allow you plan to process
your claim before you access your account.
HDHP/HSA or HRA Features: Eligibility
My spouse
is covered by her own non-federal health plan. If I select a family HDHP
to cover the kids, does my spouse’s plan affect my eligibility for
the HSA or HRA?
If you are not covered by your spouse’s health plan, you are
eligible for an HSA. You are ineligible when you are covered by another
health plan.
To qualify
for an HSA you cannot be enrolled in a health care program already. If
this is correct, does being a Veteran enrolled in the VA Health Care System
prevent me from being eligible for an HSA? I am a Federal employee.
IRS guidance states that you are not eligible to make contributions
to your HSA for three months after each use of VA medical or prescription
drug services.
Must a
participant 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?
That is correct. You may, however, join an HDHP and have an HRA while
also covered by other health insurance.
I carry
the health insurance for my family but I file jointly with my husband
on my Federal taxes. Does this mean I am not eligible?
You are eligible. Filing jointly as a spouse does not mean you are
a dependent on your husband’s tax return.
If we apply
during Open Season, and then find we are not eligible for an HSA, can
we
cancel?
It is important to review eligibility requirements before you enroll.
If you have not used
any benefits or received a plan contribution to your HSA, you may cancel
your enrollment no later than 60 days after the effective date of your
enrollment and you may enroll in another plan with a retroactive effective
date.
HDHP/HSA or HRA Features: Reimbursements
Will
the insurance companies file the reimbursement claim for us, as they do
for the Flexible Spending Account?
This may occur under certain circumstances. Consult the plan.
Will
reimbursement from the plan operate pretty much the same as the current
FSAFEDS? That is, will we fax in receipts to a single source independent
from the health plan provider for items that we believe are covered, have
someone verify that it is an approved expense and receive a payment for
the approved item?
You will not be required to prove eligible medical expenses in order
to withdraw funds from your HSA. We suggest saving your documentation.
The IRS may ask for it if you are audited. You may obtain reimbursement
from your HSA in a number of different ways, depending on the procedures
established by your account trustee.
How
soon can you withdraw funds from your HSA for medical expenses? For example,
if you have surgery in January and need $1000.00 for your deductible,
are you able to pay the deductible then (as in the case of a health care
flexible spending account, HCFSA) or do you have to wait until your account
has accumulated $1000.00?
You have to wait until $1,000 is accumulated. Just like a checking
account, you can only draw out what is in your account. Your health
plan will contribute its share on a monthly basis and you can contribute
additional funds up to the maximum amount, generally the plan’s
deductible.
HCFSA
May a Health Care Flexible
Spending Account (HCFSA) participant transfer the balance from an HCFSA
to an HSA or HRA and use it in 2005?
No, HCFSA balances in 2004 may not be transferred. If a balance exists
at the end of the year, the balance will be forfeited.
An FEHB enrollee chooses
an HDHP/HSA for 2005. The FEHB enrollee cannot participate in an HCFSA.
May the FEHB enrollee participate in a DCFSA?
Yes, the FEHB enrollee will still be eligible to have a dependent care
FSA. Unlike with an HCFSA, an enrollment in an HDHP/HSA does not affect
eligibility for a dependent care FSA.
Military Veteran
A husband and wife are
covered under FEHB with Self and Family coverage. The husband is the employee
and receives VA disability benefits due to a military – related
injury. Do VA disability benefits disqualify the husband from HDHP/HSA?
If yes, should the husband and wife choose Self Only coverage and choose
an HDHP/HSA?
Individuals receiving a VA disability benefit are entitled to enroll
in an HDHP and establish an HSA. However, IRS guidance states that they
cannot make a contribution to their HSA for 3 months after each use
of VA medical or prescription drug services.
Could you clarify the definition
of VA benefits? Is it medical care only or other benefits?
VA benefit refers to any medical services and prescription drug benefits.
Retiree and Early Retiree
A spouse is Medicare
enrolled, the employee has Self and Family coverage under FEHB including
the spouse. Is the employee eligible for an HSA or is the employee limited
to an HRA?
You are eligible for an HSA if you enroll in an HDHP, even if your
spouse is enrolled in Medicare, and you may contribute the amount permitted
for a Self and Family enrollment. You may pay for your spouse’s
non-reimbursable medical expenses from your HSA.
An employee is
retiring, the spouse is already enrolled in Medicare, the employee will
continue Self and Family coverage (for self & spouse) after retirement.
Can the employee continue the HSA?
As long as you are not enrolled in Medicare or another health insurance
plan and enrolled in an HDHP, you may continue contributing to the HSA.
I have FEHB coverage
and I’m a military retiree who has TRICARE. Can I get an HSA or
FSA?
People with TRICARE cannot have an HSA because TRICARE is comprehensive
insurance coverage. However, if you are an employee and eligible for
FEHB coverage, you can have an HCFSA instead.
An FEHB member
retires, under age 65, mid-year 2005. In 2005 the member selected a HDHP/HSA.
What happens at the point of retirement with the HSA? Will voluntary contributions
be allowed?
The HSA is still the FEHB member’s account. As long as the retiree
remains enrolled in his HDHP and is not covered by another health plan
or Medicare, he is eligible to continue making contributions to the
HSA. Voluntary contributions may also be made to bring the HSA to the
maximum amount, generally the plan’s deductible.
An FEHB enrollee
is 61 and retired from Federal employment. Would it make sense financially
to select an HDHP/HSA now and NOT enroll in Medicare when he becomes 65?
There is no single answer as to what option is best. You need to review
your and your family’s medical expenses, the benefits offered
by an HDHP for which you are eligible, the amount you can contribute
to the HSA, and your tax information before making your choice. Please
keep in mind that your Medicare Part B premium may be higher if you
do not enroll when you first become eligible. It may not be in your
financial interest to turn down Medicare coverage.
What are the advantages
and disadvantages of an HRA for a retiree on Medicare?
The remaining HRA credit “rolls over” if not used in the
current year. You can use it to pay for Part B Medicare premium.
If I am retired
and on Medicare now, do I continue with Medicare if I select an HRA?
Yes, you are eligible for an HRA even if you are enrolled in Medicare.
I am about to retire.
I had pretty much decided not to take Medicare Part B, because there did
not seem to be any plans under FEHB which would give me a discount if
I did (i.e. Medigap). Does this plan provide an equivalent to a Medigap
policy?
An HDHP is not a Medigap policy. To be eligible to enroll in an HDHP
with an HSA, you must not be enrolled in Medicare Part A or Part B.
However, please note that a number of the current fee-for-service health
plans do waive or reduce deductibles and copayments, if you are enrolled
in both Medicare A and B.
How will an HSA/HRA
coordinate with a dual eligible, FEHB member and FEHB retiree, who has
TRICARE coverage?
You are not eligible for an HSA if you have TRICARE For Life. You may,
however,
have an HRA.
What happens
when an FEHB member who is enrolled in an HDHP with an HSA
becomes eligible for Medicare?
The HSA will be available for qualified medical expenses including
premiums. Your health plan will discontinue making contributions to
your HSA and will open and begin crediting an HRA for you.
IRS Tax Questions
May voluntary contributions
to an HSA, while enrolled in an HDHP, be deducted pre-tax from my paycheck?
Voluntary contributions by the FEHB enrollee to the HSA will not be
deducted pre-tax from paychecks. Voluntary contributions must be made
directly to the HSA custodian who receives the plan’s “premium
pass through.” The enrollee may set up a separate HSA account
with a custodian of choice. You then claim the amount as an “above
the line” deduction on your tax return.
What exactly is an “above
the line” tax deduction? I’m assuming that we don’t
have to report any of the distributions from the HSA to the IRS as long
as they are for approved medical expenses?
“Above the line” means you will reduce your taxable income
regardless of whether you itemize or use the standard deduction on your
income tax form. The voluntary contributions are a tax deduction, not
a tax credit. The distributions from your HSA are tax-free. The IRS
will set rules and reporting requirements. Check with the IRS or your
tax advisor.
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