HSA Eligibility Requirements
What is a Health Savings Account?
A Health Savings Account (“HSA”) is a tax-exempt trust or custodial account created for the purpose of saving and paying for qualified medical expenses in connection with a High Deductible Health Plan (HDHP).
An HSA is established for the benefit of an individual, and is “portable.” This means that if you change employers or leave the work force, the HSA stays with you rather than with your former employer. Your HSA at UMB Bank, n.a. is a custodial account that consists of all funds you and your employer contribute to your HSA, all investments you make with or through custodian using those funds, and all earnings on those funds.
Who can have an HSA?
An “eligible individual” may establish an HSA. An “eligible individual” means, with respect to any month, an individual who:
- is covered under an HDHP as of the first day of the month.
- is not also covered by any other health plan that is not an HDHP (with certain exceptions for certain types of permitted coverage, as discussed more fully below).
- is not entitled to Medicare benefits, and
- may not be claimed as a dependent on another person’s tax return.
What is a High Deductible Health Plan (HDHP)?
An HDHP is a health plan with an annual deductible for an individual (self only) or a family (coverage for more than one individual) that meets the minimum deductible amount published annually by the U.S. Treasury Department.
In addition, the annual out-of-pocket expenses required by the plan do not exceed the out-of-pocket maximums published by the U.S. Treasury Department. Out-of-pocket expenses include deductibles, co-payments, and other amounts the participant must pay for, covered benefits, but do not include premiums or amounts incurred for non-covered benefits (such as amounts in excess of usual, customary and reasonable amounts, and financial penalties).
Can a health plan that imposes a lifetime limit on benefits still qualify as an HDHP?
A plan does not fail to be treated as an HDHP merely because it imposes a reasonable lifetime limit on benefits provided under the plan. In such a case, amounts paid above a lifetime limit will not be treated as out-of-pocket expenses in determining the annual out-of-pocket maximum.
Can a health plan that does not have a deductible for preventive care still qualify as an HDHP?
A plan does not fail to be treated as an HDHP merely because it does not have a deductible (or has a small deductible) for preventive care. For this purpose, preventive care includes such items as periodic health evaluations, routine prenatal and well-child care, child and adult immunizations, tobacco cessation programs, obesity weight-loss programs, and certain screening services.
Who can offer an HDHP?
An HDHP may be offered by a variety of entities, including insurance companies and Health Maintenance Organizations (HMOs).
Can you be covered by another health plan and still be eligible for an HSA?
You are ineligible for an HSA if you are covered under another health plan (whether as an individual, spouse or dependent) in addition to your qualified HDHP, except as provided below.
What other types of health coverage can you maintain without losing eligibility for an HSA?
You remain eligible for an HSA if, in addition to an HDHP, you have any one or more of the following:
- insurance under which substantially all of the coverage relates to liabilities from workers' compensation laws, torts, or ownership or use of property (such as automobile insurance).
- insurance for a specified disease or illness.
- insurance paying a fixed amount per day (or other period) of hospitalization.
- coverage (whether through insurance or otherwise) for accidents, disability, dental care, vision care, or long-term care.
You may also have coverage under an Employee Assistance Program (EAP), and you may have a discount card that enables you to obtain discounts for healthcare services or products at managed care market rates.
Are HSAs allowed under a cafeteria plan?
An HDHP can be provided as part of a cafeteria plan and can be used in conjunction with an HSA. The HSA can be established under a cafeteria plan.
Can an employer allow you to elect an HSA mid-year if offered as a new benefit under the employer's cafeteria plan?
An employer may offer an HSA mid-year as a new benefit under a cafeteria plan, and allow you to elect an HSA, so long as your election for the HSA is made on a prospective basis. In such a situation, however, you may have other coverage under the cafeteria plan that cannot be changed (e.g., coverage under a health flexible spending account) that may prevent you from being an eligible individual with respect to the HSA.
You’ll hear from HSA experts who will cover key topics that your clients and other HSA account holders probably don’t understand and discuss several lesser-known strategies to help them take their HSA game to the next level.‡