Arizona Medical Insurance > Health Savings Accounts (HSA)

General

The new year brings new limits on maximum HSA contributions for qualified high-deductible health plans (HDHPs).

There are 8 companies in Arizona as of this writing which offer Individual and Family HSA qualified Major Medical Plans;

• BlueCross BlueShield of Arizona's Blue Preferred Saver & BlueClassic Saver,
• Aetna's PPO High-Deductible 3000 or 5000, Preventative and Hospital Care 3000,
• LifeWise HSA & HSA 20 Plans
• GoldenRule's Health Savings Account Plans
• Celtic's CelticSaver HSA
• Assurant Health's OneDeductible HSA
• HealthNet's HSA Eligible plans
• Humana's Total HSA, Total Plus HSA, & Share 80 HSA

In addition, President Bush signed HSA legislation in 2006 that ha had s a positive impact for all HSAs. The highlights of this legislation include:

• Allowing people to take their health savings accounts with them if they move from job to job.
• Raising contribution limits and allowing for a one-time transfers from IRA accounts.
• Allowing a contribution up to an annual limit of $2,900, regardless of the deductible for their insurance plan.
• Allowing the option to fully fund their HSAs regardless of what time of year they sign up for the plan
  

Eligibility

• Individuals under the age of 65 are eligible to contribute to an HSA if they have a qualified health plan.
  • For self-only policies, a qualified health plan must have a minimum deductible of $1,100 with a $5,600 cap on out-of-pocket expenses (indexed annually).
  • For family policies, a qualified health plan must have a minimum deductible of $2,200 with a $11,200 cap on out-of-pocket expenses (indexed annually).
• Preventive care services are not subject to the deductible. In addition, coverage for accidents, disability, dental care, vision care, and long-term care is not subject to the deductible.

Contributions

• Contributions are allowed up to 100% of the health plan deductible. The maximum annual contribution is $2,900 for self-only policies and $5,800 for family policies (indexed annually).
• Individuals age 55 – 65 may make additional “catch- up” contributions of up to $900 in 2008, increasing to $1,000 annually in 2009 and thereafter. A married couple can make two catch- up contributions as long as both spouses are at least 55. Catch-up contributions will help individuals accumulate assets for retiree health expenses.
• Contributions may be made by individuals, family members and employers.
  • Contributions made by individuals and family members are tax-deductible (for the account beneficiary) even if the account beneficiary does not itemize. Employer contributions are made on a pre-tax basis and are not taxable to the employee. Employers will be allowed to offer HSAs through a cafeteria plan.
• Investment earnings accrue tax-free.

Distributions

• HSA distributions are tax- free if they are used to pay for qualified medical expenses, such as:
  • Amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease,
  • Prescription drugs,
  • Qualified long-term care services and long-term care insurance,
  • Continuation coverage required by Federal law (i.e., COBRA),
  • Health insurance for the unemployed,
  • Medicare expenses (but not Medigap), and
  • Retiree health expenses for individuals age 65 and older (Note: retiree health plans would not have to meet the $1,100/$2,200 minimum deductible requirements.)
• Distributions made for any other purpose are subject to income tax and a 10% penalty. The 10% penalty is waived in the case of death or disability. The 10% penalty is also waived for distributions made by individuals age 65 and older.

Treatment at Death

• Upon death, HSA ownership may transfer to the spouse on a tax-free basis.

Effective Date

• January 1, 2008.