Health Savings Accounts — How they really work

Health–care costs continue to skyrocket, and with an unpredictable economy, you may think now is a good time to consider the much talked–about Health Savings Account as an option for your health plan.

What is an HSA?

A Health Savings Account (HSA) is a high deductible health plan paired with a health savings bank account. This bank account can be funded by the employer, the employee or both to pay for eligible medical expenses incurred before meeting your deductible.

Qualifying High Deductible
Health Insurance Plan.
(Provided by insurance company)

Health Savings Account
Pays for out–of–pocket expenses before deductible.
(Provided by banking partner)

High deductible health plans

A high deductible health plan is a plan with a minimum annual deductible and a maximum out–of–pocket limit (see below). These minimums and maximums are determined annually by the IRS and are subject to change.

2010 Coverage Limits	Minimum Annual Deductible	Maximum Annual Out of Pocket
Individual	$1,200	$5,950
Family	$2,400	$11,900

How HSAs benefit your business

Because consumers have greater out–of–pocket costs with an HSA, they tend to become stronger advocates for their own good health — for example, by taking advantage of many free preventative services such as annual physicals, mammograms and vaccinations. Consumers actively engaged in maintaining good health cost the system less than consumers who aren’t — which ultimately saves everyone (including employers) money.

How HSAs benefit your employees

HSAs allow employees to save for unexpected health–care expenses using before–tax dollars. Additionally, the IRS limits the amount you can save. For 2010, the annual contribution limits are:

$3,050 for individual coverage
$6,150 for family coverage

Unlike traditional flexible savings accounts which have “use it or lose it” restrictions attached, you don’t lose unused money in an HSA. Any balance remaining at the end of the year rolls over, allowing you to save long term for your health–care needs.

Some frequently asked questions about HSAs:

Why should I elect an HSA?

Cost Savings
- Tax Benefits
  - HSA contributions are excluded from federal income tax
  - Interest earnings are tax deferred
  - Withdrawals for eligible expenses are exempt from federal income tax
- Reduction in medical–plan contribution
- Unused money is held in an interest-bearing savings or investment account
Note: Many states have not passed legislation to provide favorable state tax treatment for HSAs. Therefore, amounts contributed to HSAs and interest earned on HSA accounts may be included on the employee’s W–2 for state income tax purposes.
Long–Term Financial Benefits
- Save for future medical expenses
- Funds roll over year to year
- This is your account — you can take it with you regardless of where you work or live.
Choice
- You control and manage your health–care expenses.
- You choose when to use HSA dollars to pay your health–care expenses.
- You choose when to save your HSA dollars and pay health–care expenses out of pocket.

What is a deductible?

It is a set dollar amount, determined by your plan, that you must pay out–of–pocket or from your HSA account before insurance coverage for medical expenses can begin.

How much can I contribute to an HSA?

As noted by federal law for the 2009 calendar year, the annual contribution limits are:

$3,000 for 2009 for individual coverage
$5,950 for family coverage.

Individuals ages 55 or older may be eligible to make a catch–up contribution of $1,000 in 2009.

What is the difference between an HSA and Flexible Savings Account (FSA)?

An HSA can roll over unused funds from year to year.
An FSA cannot roll over unused funds from year to year.

When do I use my HSA?

After visiting a physician, facility or pharmacy, your medical claim will be submitted to your HDHP for payment. Your HSA dollars can be used to pay your out–of–pocket expenses (deductibles and coinsurance) billed by the physician, facility, or pharmacy or you can choose to save your HSA dollars for a future medical expense.

How do I use my HSA?

Employee and / or Employer fund the HSA account.
Employee seeks medical care
Medical services are paid by the HDHP insurance company to the provider at the discounted rate, subject to deductible and co–insurance.
Employee may seek reimbursement from his/her HSA account for amounts paid toward deductible and co–insurance.
Deductible and out–of–pocket maximum are fulfilled.
Employee may be covered for all remaining eligible expenses.*

*Preventive care may be covered at 100 percent, subject to individual plan design.

TriSure’s employee benefits professionals are experienced in helping companies set up and maintain HSA accounts. Let us help you build a benefits program that’s healthy for both your employees and your bottom line.