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Understanding a Health Savings Account (HSA)

Understanding a Health Savings Account (HSA) - Departments & Programs, UW Health, Benefits, UW Health Open Enrollment, UWMF Open Enrollment, Health Savings Account, Resources




This Know Your Benefits article is provided by M3 Insurance and is to be used for
informational purposes only and is not intended to replace the advice of an insurance
professional. Visit us at http://m3ins.com. ©2007-2014, 2016 Zywave, Inc. All rights
reserved.
From UWMF
Understanding
a Health
Savings
Account
What is a health savings account?
Otherwise known as an HSA, a health
savings account can be funded with your tax-
exempt dollars, by your employer, by a family
member or by anyone else on your behalf.
Dollars from the account can help pay for
eligible medical expenses not covered by an
insurance plan, including the deductible,
coinsurance, and even health insurance
premiums, in some cases.

Who is eligible for an HSA?
Anyone who is:
• Covered by a high-deductible health
plan (HDHP);
• Not covered under another medical
plan that is not an HDHP;
• Not entitled to (eligible for AND
enrolled in) Medicare benefits; or
• Not eligible to be claimed on another
person’s tax return.

What is a high deductible health plan
(HDHP)?
A high-deductible health plan is a plan with a
minimum annual deductible and a maximum
out-of-pocket limit as listed in the following
table. These minimums and maximums are
determined annually by the Internal Revenue Service (IRS) and are subject to change.

Type of Coverage Minimum Annual
Deductible
Maximum Annual Out-of-
pocket
Individual $1,300 (for 2016 and 2017) $6,550 (for 2016 and 2017)
Family $2,600 (for 2016 and 2017) $13,100 (for 2016 and 2017)

How does an HSA work?

Part 1: Qualifying High Deductible Health Insurance Plan





Provides health care benefits after the deductible has been met.


Part 2: Health Savings Account





Pays for out-of-pocket expenses incurred before the deductible is met.

What are the steps in an HSA?
1. Employee, employer, family member and/or someone else funds the
employee’s HSA account.
2. Employee seeks medical services.
A health savings account can be funded with your tax-
exempt dollars, by your employer, by a family member
or by anyone else on your behalf.

Understanding a Health Savings Account


3. Medical services are paid by HDHP,
subject to deductible and
coinsurance.
4. Employee may seek reimbursement
from HSA account for amounts paid
toward deductible and coinsurance.
5. Deductible and out-of-pocket
maximum fulfilled.
6. Employee may be covered for all
remaining eligible expenses.*

The HDHP can provide preventive care
benefits without the required minimum
deductible.

*Subject to plan design; check your HDHP
Summary Plan Description.

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.
You may also be able to use an HSA debit
card to access your HSA funds, if your HSA
custodian or trustee allows it.
You may use your HSA for non-medical
expenses. However, HSA amounts that are
used for non-medical expenses are taxable as
income to you and are generally subject to an
additional 20% penalty.

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?
The annual HSA contribution limits for 2016 are:
• $3,350 for individual coverage and $6,750 for family coverage
The annual HSA contribution limits for 2017 are:
• $3,400 for individual coverage and $6,750 for family coverage
Individuals age 55 or older may be eligible to make a catch-up contribution of $1,000.

What is the difference between an HSA and Flexible Spending Account (FSA)?
• An HSA can roll over unused funds from year to year and is portable if the
employee leaves the company.
• An FSA cannot roll over unused funds from year to year and is not portable.

Can I contribute to both an HSA and an FSA in the same year?
General purpose FSA coverage will make you ineligible for HSA contributions.
However, certain types of FSA designs will not prevent your HSA eligibility. For
example, if you are covered under a “limited FSA” (for example, an FSA that covers
vision, dental and/or preventive care expenses on a first-dollar basis), you can be
eligible for an HSA.
Also, you can be eligible for an HSA if you are covered under a “post-deductible FSA”
(that is, an FSA that only pays or reimburses for preventive care or for medical
expenses that are incurred after the minimum annual HDHP deductible has been met).
Please ask UWMF if a limited or post-deductible FSA is available to you.

What if I enroll in an HSA in the middle of the year?
Your HSA contributions are generally determined on a monthly basis. However, if you
enroll in an HSA mid-year, you are allowed to make a full year’s contribution, provided
you are eligible on Dec. 1 of that year and you remain eligible for HSA contributions for
at least the 12-month period following that year.

Why should I elect an HSA?
1. Cost Savings
• Triple tax benefits
o HSA contributions are excluded from federal income tax
o Interest earnings are tax-deferred
o Withdrawals for eligible expenses are exempt from federal income tax
• Reduction in medical plan contribution

Understanding a Health Savings Account


• 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.

2. Long-term Financial Benefits
• Save for future medical expenses.
• Funds roll over from year to year.
• Account is portable—you take it with
you even if you leave the company.

3. Choice
• You control and manage your health
care expenses.
• You choose when to use your HSA
dollars to pay your health care
expenses.
• You choose when to save your HSA
dollars and pay health care
expenses out-of-pocket.
• You decide whether to use your HSA
dollars to pay for non-medical
expenses and incur the additional
taxes.