Providence HSA - Frequently Asked Questions

• What is a Health Savings Account (HSA)?
• What qualifies a health plan to work for an HSA account?
• How does an HSA save on health care costs?
• May employers contribute money to the employee health savings account?
• Is there a maximum annual contribution limit to the health care savings account?
• What are the qualifications for an employee for being an account holder?
• How does banking and the HSA work?
• What can the account funds be used for?
• Is the employer responsible for the health savings account?
• Is an HSA qualified plan the right choice for you?
• Do you need additional information about HSAs?

Recent federal legislation created the health savings account or HSA. An HSA enables your employees to save pre-tax dollars for future medical, retirement, or long-term care premium expenses. Your employees own the health savings account. Money in their accounts can roll over from year to year, and employees can take the account with them if they change jobs. The account can be used as an employee benefit, like a 401(k), providing your employees with a significant tax-free investment.

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To open an HSA, an employee must be enrolled in a qualified high deductible health plan (HDHP). To be HSA qualified, a high deductible health plan must have:

• A minimum individual annual deductible of $1,200 or a minimum family annual deductible of $2,000.
• An annual out-of-pocket maximum of no more than $5,000 for individual coverage or $10,000 for family coverage. Deductibles apply to out-of-pocket maximums.
• All covered benefits, except for preventive care, must be subject to the deductible. Our Providence HSA Qualified Plans waive the deductible for preventive care.

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HSAs can save on costs in two key ways:

1. You will see an immediate savings on your monthly premium statement. Premiums for high deductible health plans, a requirement for an HSA qualified plan, are lower than for plans with low or no deductibles.
2. The other way you will see savings is by sharing accountability for health care costs with your employees. With an HSA qualified plan, your employees are responsible for their health care costs until they meet their deductible; and they may use their tax-free health care savings account funds to pay these out-of-pocket costs. Your employees can contribute up to their deductible amount each year to their HSA. Funds in the account can be used to pay for eligible expenses while they are meeting the deductible or the funds can stay in the account. Unspent money can roll over into the next year and grow – tax-free. Employees learn to be wise health care consumers as they actively manage their account funds, saving both you and them money. They become invested in the costs of their health care.

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Yes. You can fund all or part of each employee's HSA and your contributions are tax-free to employees. Or you can choose to have your employees be sole contributors. No matter who contributes the money, the account belongs to the employee, not the employer.

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Yes. The maximum annual contribution is $2,600 for an individual or $5,150 for a family OR the health plan's deductible amount – whichever is less. The maximum amounts are indexed for inflation and could increase in subsequent years.

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• Employees must have coverage under a HSA qualified high deductible health plan, such as a Providence HSA Qualified Plan.
• Employees must be under age 65 and not eligible for Medicare benefits.
• Employees must not have coverage under another health plan, such as a spouse's plan.
• Employees must not be claimed as a dependent on another person's tax return.

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HSA accounts operate much like Individual Retirement Accounts (IRAs). The employee owns the account and controls the timing of withdrawals and if those withdrawals are tax-free or taxable. HSA trustees are usually banks. Funds in the account are available through debit cards or checks.

Deposits can be made by a payroll deduction through the employer, electronic transfer from another bank account or by submitting a check and deposit slip. Account balances earn interest. HSA trustees usually offer investment options for health savings accounts. Funds may be invested in stocks, bonds or mutual funds. Your employees can use the money in their accounts to pay for current health expenses or keep the money in the account as an investment.

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Funds in the accounts can be used by employees to pay for health care until the deductible is met or to pay for any IRS Section 213 allowable health-related expenses that are not covered by the health plan, such as vision services or over-the-counter medications. Funds also can be used to pay for premiums for long-term care coverage, COBRA and other types of health insurance premiums. Funds also can be used for non-qualified expenses, but those withdrawals are subject to federal income tax and a 10 percent excise tax if the HSA owner is under age 65.

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No. Each employee or account holder is responsible for his or her own account. Each account holder is responsible for including HSA transactions in personal income tax filings and for using the account according to tax law.

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The answer may be “yes” if:

1. You feel it is appropriate to lower your premium costs by offering your employees a health plan that requires them to meet a high deductible before health coverage is provided.
2. You believe in giving your employees complete control over managing their own health care savings accounts, even if you help fund their accounts through employer contributions.

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Talk to us today about our new Providence HSA Qualified Plans. We may have the right choice for you. For details on banking and IRS regulations, please consult your tax or investment advisor. You may also visit the AHIP HSADecisions.org Learning Center Web site.

Portland Office

503-574-6300 or toll-free 1-877-245-4077

Eugene Office

1-877-245-4077

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